In order to make it more difficult for Russia to finance the war of aggression in Ukraine, the outgoing US government is imposing what it claims are the toughest sanctions to date against the country’s energy sector. Britain joined the sanctions against two of Russia’s largest oil companies, Gazprom Neft and Surgutneftegas. According to information from London, the two companies produce more than a million barrels of oil every day. That corresponds to a value of around 23 billion US dollars (around 22.5 billion euros) per year.
The US government is also sanctioning, among other things, 183 ships, most of which it counts as part of the so-called Russian shadow fleet. These are tankers and freighters that Russia uses to circumvent existing sanctions on oil transport. In November, the British announced sanctions against such ships, which are now no longer allowed to call at British ports, for example.
As a result of the sanctions, U.S. citizens and people located in the United States are prohibited from doing business with the sanctioned companies and individuals. International business also tends to become significantly more difficult for those affected by the sanctions. In this specific case, the US government also announced that it would further restrict an earlier provision that had previously allowed the brokering of certain financial transactions in the energy sector despite existing sanctions against Russian banks.
The purpose of the sanctions
The Russian leadership benefits from the income from the energy industry. With the new measures, the governments in the USA and Great Britain want to set off a chain reaction. The logic: With the weakening of the Russian energy industry, the Kremlin will be deprived of the basis for war financing. “Our sanctions act like sand in the gears of the Russian war machine,” it said. “We estimate that our actions will cost Russia several billion dollars every month.”
British Foreign Secretary David Lammy said: “Oil revenues are the lifeline of Putin’s war economy.” Every ruble taken away from Putin will help save Ukrainian lives.
The U.S. government hopes the measures will further weaken the Russian currency, fuel inflation and force the Russian central bank to raise interest rates, which are already at record highs, even further. This, in turn, could further worsen the financial situation of Russian companies. “The aim is to change Putin’s calculus about the costs of continuing a senseless war while giving Ukraine greater leverage – leverage it needs to negotiate a just and lasting peace,” it said.
Washington sees changing situation on energy markets
Washington justified the timing of the sanctions with a changed situation on the global energy markets. “At the beginning of the war (in February 2022), energy markets were very tense and we were concerned that measures against Russia’s oil exports could drive up prices so much that Russia would end up earning more despite lower sales volumes,” it said . That’s why they initially worked with the G7 allies on a price cap for Russian oil exports to third countries. The current market situation with increased production capacities – for example in the USA, Canada and Brazil – now allows for a tougher approach without destabilizing the global oil market.
Moscow appears unimpressed
After the sanctions were announced, Russia’s Foreign Office spokeswoman Maria Zakharova scoffed that some sanctions left their mark on history, while others could only spread dirt. The Kremlin had already declared hours earlier that it was prepared to oppose the measures, in anticipation of the measures. The Biden administration is trying to leave successor Donald Trump the “heaviest possible legacy,” said Kremlin spokesman Dmitry Peskov.
Gazprom Neft, the group affected by the sanctions, said the company had been “preparing for various negative sanctions scenarios” over the past two years.
Trump’s inauguration brings uncertainty
When the Republican Trump takes office on January 20th, the dynamics of US sanctions policy could fundamentally change. Trump regularly emphasizes his good relations with Russian President Vladimir Putin. During the election campaign, he repeatedly claimed that he could end the war in Ukraine within 24 hours – but he left it open how exactly. There are concerns in Kiev and other European capitals that Trump could cut support to Ukraine to pressure the government there to negotiate with Moscow.
Meanwhile, the Biden administration is working on the final steps to send extensive military aid to Kiev in order to use the funds already approved by Congress in a timely manner. The new sanctions add to a long series of measures that the United States and allies – including the European Union – have taken since the start of the war to weaken Moscow’s revenue and military capacity.
