San Francisco Frontiers - US, UK unveil widespread sanctions against Russia's energy sector

The US Treasury Department said it was designating more than 180 ships and Russian oil majors Gazprom Neft and Surgutneftegas, fulfilling "the G7 commitment to reduce Russian revenues from energy".

At the same time, the UK government announced sanctions against the two companies, saying their profits were "lining (Russian President Vladimir) Putin's war chest and facilitating the war" in Ukraine.

"Taking on Russian oil companies will drain Russia's war chest –- and every ruble we take from Putin's hands helps save Ukrainian lives," UK Foreign Secretary David Lammy said in a statement.

Gazprom Neft slammed the sanctions as "baseless" and "illegitimate", Russian state news agencies reported.

"Gazprom Neft considers the decision to include its assets on the sanctions list as baseless, illegitimate and contrary to the principles of free competition," Russian state news agencies quoted a company representative as saying.

- 'Sweeping action' -

In total, the United States is sanctioning 183 oil-carrying vessels, Russian oil traders and oilfield providers, the two Russian oil majors and more than two dozen of their subsidiaries.

"Today, the United States imposed the most significant sanctions yet on Russia's energy sector, by far the largest source of revenue for Putin's war," deputy National Security Advisor for international economics Daleep Singh said in a statement.

"These sanctions will hit hard across every key node of Russia's oil production and distribution chain," he added.

Senior administration officials told reporters that the measures were designed to give the United States additional leverage to help broker a "just peace" between Ukraine and Russia.

"The United States is taking sweeping action against Russia's key source of revenue for funding its brutal and illegal war against Ukraine," US Treasury secretary Janet Yellen said in a statement.

"With today's actions, we are ratcheting up the sanctions risk associated with Russia's oil trade, including shipping and financial facilitation in support of Russia’s oil exports," she added.

- Strong economy influenced timing -

Friday's announcement comes just 10 days before US President Biden is due to step down, and puts President-elect Donald Trump in something of an awkward position, given his stated desire to end the Ukraine war on day one of his presidency.

The timing of the decision was influenced by the relative strength of the oil sector and the US economy, according to the senior administration officials, who noted that both oil prices and inflation had fallen significantly since Russia's invasion of Ukraine in 2022.

Alongside Treasury, the US State Department is also taking action against Russia's energy sector, "blocking two active liquefied natural gas projects, a large Russian oil project, and third-country entities supporting Russia's energy exports," the Treasury Department said.

The State Department is also designating "numerous Russia-based oilfield service providers and senior officials of State Atomic Energy Corporation Rosatom," they added

Friday's sanctions are the latest in a long line of announcements by the US and its G7 allies targeting the Russian economy -- including its lucrative oil and gas sector -- over its 2022 invasion of Ukraine.

The United States and its allies imposed a price cap on Russian oil in a bid to limit petroleum sales and revenues without curbing exports so sharply that it would cause global oil prices to soar.

But some countries, notably China, have continued to import Russian crude oil without observing the price ceiling.

To skirt the measures targeting its oil sector, Russia has also resorted to using a so-called "shadow fleet" of often ageing vessels that operate under dubious ownership or without proper insurance.

Last month, European Union countries agreed to blacklist around 50 additional oil tankers from Russia's "shadow fleet," the trading bloc's fifteenth package of sanctions since the 2022 invasion of Ukraine.

M.Gonzalez--SFF