How Biden's tough sanctions will hit Russia's energy sector and whether Trump will lift them
On 10 January, the United States imposed major sanctions targeting Russia’s energy sector.
The Biden administration, nearing the end of its term, aimed to weaken the Kremlin’s ability to fund the war in Ukraine by reducing oil export revenues.
Read more in the article by Ilya Zaslavskiy and Maksym Gardus of Razom We Stand – Biden’s final sanction blow: how the US seeks to halt Russia's oil exports.
The new sanctions package blocks Russian oil companies' access to international services and product markets, while also complicating financial transactions.
Moreover, it cancels exemptions for energy payments through Russian banks, cutting off traditional trade servicing channels. The ban on American companies' participation in oil services could pose a serious obstacle to Russia's further oil extraction.
Additionally, 183 vessels from the so-called shadow fleet have come under restrictions. This accounts for 30-40% of Russia's active shadow fleet (if estimated at around 600 vessels, although there are figures as high as 1,400 when including ships transporting oil from Iran and Venezuela).
Gazpromneft and Surgutneftegaz, which handle substantial volumes of oil transportation, along with dozens of their subsidiaries, have been sanctioned. Existing sanctions against Russian insurance companies Ingosstrakh and AlfaStrakhovanie, as well as the shipping company Sovcomflot, have been expanded.
The new phase of tightened US sanctions could jeopardise oil exports of up to 800,000 barrels per day. Consequently, Russian oil companies may lose 27.5% of their maritime oil exports, which amounted to 2.9 million barrels per day at the beginning of January.
New workarounds will become more expensive, increasing inflationary pressure in Russia and raising transportation costs, particularly within the "shadow fleet."
The ban on American oil service provision could trigger technological issues in Russia's oil production.
The new US sanctions have elicited mixed reactions among key international players.
China, one of the largest buyers of Russian oil, finds itself in a difficult position. India, which has been actively purchasing discounted Russian oil, now faces the need to reconsider its stance.
OPEC+ countries remain passive observers.
The US's European partners largely approve of the sanctions but are keen to avoid disruptions in liquefied natural gas supplies caused by the new restrictions.
The new sanctions package is not only an economic tool but also a political instrument. By imposing these measures at the end of its term, the Biden administration has signaled a firm commitment to maintaining a tough stance on Russia.
The sanctions are designed to make their future reversal more challenging.
Moreover, Biden's team has left their successors a tool for political leverage over Russia. The sanctions list excludes Rosneft and Lukoil (Russia's largest oil producers), foreign banks, or major ports.
Some members of the Trump administration believe that tougher energy sector sanctions are necessary to bring Russia to the negotiating table. However, Trump himself has refrained from making clear statements.
For Russia, these sanctions represent not only an economic blow but also a demonstration of international isolation.
For the US and its allies, the new restrictions are a critical tool of political and economic pressure on Russia.