Joe Biden, in his last days as president of the United States, has announced a new step to reinforce Ukraine in its war against the Russian invasion. About to leave the White House and awaiting Donald Trump’s inauguration on January 20, the Treasury and State Departments have announced sanctions against Russia’s oil and gas sector. Despite the restrictions imposed since the beginning of the conflict, in February 2022, this industry still provides Moscow – the third largest producer in the world – with around 25% of its income. The measure is adopted simultaneously with the United Kingdom.
“The United States is taking sweeping action against the key revenue stream that Russia uses to fund its brutal and illegal war against Ukraine,” said Treasury Secretary Janet Yellen. “This measure builds on, and strengthens, our goal since the beginning of the war, to disrupt the Kremlin’s energy revenues.”
Two of the main Russian companies in the sector, Gazprom Neft and Surgutneftegas, will be sanctioned, as well as 183 vessels that export crude oil from Moscow. Many of them, as explained by two senior US officials who spoke on condition of anonymity, “are part of what is known as a ghost fleet of opaque Russian oil traders.” Some have not only transported Russian crude, but also sanctioned Iranian oil, according to the Treasury Department.
Penalties will also be directed against “dozens” of service companies related to the sector and Russian positions in the energy area. Many of those companies, according to the Treasury, “were only established after the invasion and quickly began handling hundreds of millions of dollars in Russian oil, months after their creation.”
The sanctioned ships make up a fleet of old vessels, which sometimes fail to comply with safety standards to transport to the purchasing countries – India and China, among others – oil sold at prices higher than $60 per barrel, the limit authorized by the G-7, the group of most developed economies, after the Russian invasion of Ukraine. For its part, the EU approved sanctions in December on ships from third countries that help Russia avoid oil penalties.
“Since the beginning of Russia’s illegal invasion of Ukraine, the United States and our allies have focused on making it more difficult for Russia to equip its forces and pay for its brutal war. “The United States will take decisive measures against the Russian energy sector, the Kremlin’s main source of income, which will affect key players in the sector,” senior officials have noted.
After the defeat of the Democrats, and their candidate, Kamala Harris, in the elections last November, the Biden Administration has insisted that it wants to weaken Russia as much as possible and leave Ukraine in the best conditions of strength for an eventual negotiation. Republican Donald Trump, who will be the new American president as of January 20, has frequently been skeptical about the economic and military aid that the United States provides to the invaded country and has suggested that he will achieve negotiations between the two enemies that will resolve the war “in 24 hours.” Despite these words, he has never specified how he plans to do it. He also has not made clear whether, once he returns to the White House, he will reduce or eliminate assistance to kyiv.
One day before disclosing the new sanctions, the Pentagon had announced the delivery of a new military aid package to kyiv worth $500 million, consisting mostly of ammunition for various weapons systems.
“This is the right time for sanctions,” senior officials have declared. Energy supplies early in the war were tight, driving up prices and helping to trigger a wave of inflation in the West. But now the US economy has stabilized and the forecasts of specialized agencies are that throughout this year the supply of crude oil will exceed demand. This factor, they point out, gives Washington “greater margin” to take measures without harming the global economy. And countries purchasing Russian crude will have other options to acquire the supply they need from other suppliers, if they wish.
It is unknown at this time what the position of the imminent Trump Administration will be on the new sanctions. Some of its members, including Vice President-elect JD Vance, have expressed skepticism about the effectiveness of such measures. And senior officials in the Biden Administration have acknowledged that their successors could well reverse the measures if they wish.
“We believe that these sanctions, and the steps we have taken to improve Ukraine’s power on the battlefield and to reduce its economic weaknesses, provide the new Administration with considerable reinforcement in its pressure capacity, and that of Ukraine, to negotiate a just and lasting peace,” the senior officials have pointed out.
They also acknowledge that, as has happened in the past with previous rounds of sanctions against areas ranging from Russia’s military industry to its banking system, Moscow will try to evade those sanctions. “It’s inevitable.” But, they point out, “the Kremlin is going to have to resort to increasingly complicated and more expensive supply channels to replace the sales that these measures are going to prohibit.”
“We are also going to have the possibility of adapting,” they add. Washington has imposed more than 5,000 sanctions and controls on Russia’s exports since the start of the war. “Many of these measures are against companies, ghost companies, intermediaries inside and outside Russia that did not even exist before the invasion,” the senior officials declare.
