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- Last chord: Biden administration imposes sweeping sanctions against Russia's oil sector
Last chord: Biden administration imposes sweeping sanctions against Russia's oil sector
The administration of incumbent US President Joe Biden has imposed large-scale sanctions against the Russian oil sector. Gazprom Neft and Surgutneftegaz, a number of top managers and more than 30 oilfield service companies have fallen under the restrictions. Industry experts believe that the American leader-elect Donald Trump may retain or cancel these restrictions to some extent. On the one hand, for the overseas "partner" they may become a bargaining chip in the same negotiations with Russia on the Ukrainian issue. On the other hand, they fit into the policy of supporting US oil companies. As for the Russian fuel and energy complex, analysts believe that the imposed restrictions may have an impact on the increase of costs in terms of technological re-equipment, the number of intermediaries among importers and the growth of the discount on Russian oil. But most importantly, they believe, it will have an impact on the global rise in oil prices and the cost of fuel in the United States, which is unlikely to please the citizens of this country.
US sanctions against Russia's oil sector
The new US sanctions against Russia will affect Gazprom Neft, Surgutneftegaz and their subsidiaries, more than 30 Russian oilfield service companies, including RN-Burenie (a Rosneft structure) and OFS Technologies (combines former Baker Hughes assets in Russia), as well as more than 180 vessels involved in the transportation of Russian hydrocarbons, which are associated with or owned by Sovcomflot, Rosneft, and Gazprom Neft. This was announced by the U.S. Ministry of Finance on January 10.
In addition, Lukoil co-owner Vagit Alekperov, Lukoil head Vadim Vorobyov and Gazprom Neft chairman Alexander Dyukov, as well as Deputy Energy Minister Roman Marshavin and Eduard Sheremettsev and others fell under the restrictions.
As representatives of the U.S. Treasury Department noted at the briefing, the main objectives of this large-scale package are not only to reduce Russia's revenues, but also to destroy its production capacity and encourage importers to seek alternative sources of supply.
Russian Foreign Ministry spokeswoman Maria Zakharova, commenting on the new US sanctions against Russia, told Izvestia that in this way he would "only leave a legacy" before his departure.
"Some leave a trace in history, others only manage to leave a legacy," she said.
How the new restrictions may affect the Russian Federation
Gazprom Neft said that the company has been consistently preparing for various negative sanctions scenarios over the past two years.
"In addition, the company has already been under unilateral foreign sanctions since 2022, so many such restrictions have already been taken into account in operational processes. The company will continue to operate, maintaining business stability," TASS quoted the press service's message as saying.
The imposed restrictions may have an impact on the increase of costs in terms of technological re-equipment, the number of intermediaries among importers and the growth of the discount on Russian oil, believes Stanislav Mitrakhovich, a leading expert of the National Energy Security Fund and the Financial University under the Government of the Russian Federation.
- But, we have already gone through all this. And if now the Argus discount is $13 per barrel, in 2022 it was above $30," he reminded.
In turn, according to Alexander Frolov, Deputy Director General of the Institute of National Energy, restrictions against specific oil service companies will require some processes to be restructured.
- However, given that since the beginning of 2022 sanctions were imposed immediately against the oil refining sector, against the Russian oilfield services sector, limiting the supply of technology, supply of equipment, provision of services, now we see the same thing, but only the restrictions are imposed not against the entire sector, but against individual companies with the note that there may be secondary sanctions," he said.
In his opinion, our companies have adapted their processes to the new realities over the past three years.
- And as for secondary sanctions, if there is a need to get equipment somewhere, to get some necessary services somewhere, maybe to get technology, chemistry and so on, there will be not one but two pads. I believe, given the number of sub-sanctioned companies in the style of 'this one has one office in Hong Kong', such organizations will still appear and will perform a high, incredibly necessary role in the current environment," he added.
Impact of sanctions on the global oil market
Nevertheless, the fate of US sanctions against Russia, including measures affecting its energy sector, will depend entirely on the new Donald Trump administration, US administration officials told reporters.
- We are not in a position to speak for the next White House team," they said during a special briefing.
Stanislav Mitrakhovich believes that Trump can both keep them and cancel them to some extent. On the one hand, for the overseas "partner" they can become a bargaining chip in the same negotiations with Russia on the Ukrainian issue.
At the same time, Alexander Frolov reminds that in 2022 the market was "frightened" by the disappearance of Russian oil.
- Does the new American president want to see the cost of oil at $120 per barrel? For the Russian budget, this can only be considered a gift. As for the rise in the price of fuel in the United States, it is unlikely to please the locals. And it is inevitable in such conditions," he believes.
The market will give its reaction to these restrictions in the near future, believes the managing partner of WMT Consult Ekaterina Kosareva.
At the same time at 20:06 Moscow time the cost of Brent was growing by 3% and traded just above $79 per barrel.
- Of course, the last point in these restrictions will be set by Trump, whose inauguration will be held on January 20, but I do not think that the next U.S. sanctions in any scenario will have a serious impact on the global and even more so on the domestic oil market," she said.
Why the West is imposing sanctions against the oil sector now
In November, against the background of increased escalation between Moscow and Washington, the U.S. side introduced a package of sanctions against the Russian banking sector. Now the energy sector has been hit, but if the financial sanctions were quite large-scale, the restrictions against Russian gas and oil were characterized by moderation.
The intensification of US sanctions pressure in recent months may be due to the upcoming change of power in the White House. First, Donald Trump continues to stick to his campaign rhetoric and remains committed to resolving the conflict in Ukraine. Second, the president-elect openly expressed his readiness to meet with Russian President Vladimir Putin the day before and accused the Biden administration of fueling the crisis and pulling Kiev into NATO, understanding Moscow's concerns.
To make matters worse, after the US Congress officially recognized the results of the presidential election on January 6, Trump noted that the transition of power was not going smoothly as promised. It is quite possible that by this the Republican is referring precisely to the radical actions of the outgoing administration, including new sanctions, arms supplies to Ukraine and authorization to fire U.S. missiles deep into Russian territory.
- Realizing that an escalation of confrontation with Moscow will not be part of the new team's plans, Biden's office is trying to leave the most difficult in these moments legacy to his successors, based on the fact that, in fact, in three years in the U.S. the struggle for the presidency will unfold again. The more time the Trump team will take to reconfigure the state mechanism to other ways of solving domestic and foreign policy problems, the more it will delay the possible result, which may please a part of American voters. This will strengthen the Democrats' position for the next federal election cycle. This explains, in my opinion, the decision on sanctions," Dmitry Novikov, first deputy chairman of the State Duma Committee on Foreign Affairs, told Izvestia.
By the way, the White House has already clarified that if the future US president wants to lift sanctions against Russia, he will need congressional approval. If Trump starts canceling restrictive measures unfavorable to Washington, he could also be called an agent of the Kremlin, which is very favorable to the Democrats, said Igor Yushkov, a leading analyst at the National Energy Security Fund and an expert at the Financial University under the Government of Russia. In his opinion, the outgoing administration is no longer afraid of any consequences, which it used to fear.
- Previously, they did not impose blocking sanctions on major Russian oil companies because it could lead to a decline in Russian exports. Something similar happened in 2022, when Russia was reconfiguring exports to alternative markets. Because of the logistics and contracting, the process took several weeks, and oil prices soared to $120 a barrel because of it. So they were wary of imposing further restrictions. All of this will have to be decided by Trump, and these restrictions could very much harm the U.S. itself," the expert said.
According to Dmitry Novikov, the introduction of new sanctions in principle should be considered a continuation of the general line, which was developed by the last administrations of the United States. The politician is convinced that the arrival of Trump will not mean a turn to friendly relations with Russia and the team of the new president will seek to preserve American hegemony in the modern world. However, it is not necessarily the case that the sanctions are imposed because of the transit of power, believes Alexander Frolov, deputy general director of the Institute of National Energy and editor-in-chief of InfoTEK. On the contrary, everything is connected with a rather consistent activity in the field of sanctions pressure.
Probably out of inertia, the UK has imposed similar sanctions. Restrictions are now in place against Russian companies Gazprom Neft and Surgutneftegaz. Restrictive measures are already having a negative impact on other countries. For example, the United States requires Serbia to completely exclude Russian participation from the company NIS, a subsidiary of Gazprom Neft, as stated by the country's President Aleksandar Vucic.
