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US Sanctions Russia's Energy Sector and 183 Ships; Oil Prices Surge Above $81

Jan 12, 2025, 05:49 AM

The United States and the United Kingdom have announced sweeping new sanctions targeting Russia's energy sector, aiming to reduce Moscow's revenues from oil and gas exports and hinder its capacity to continue the war in Ukraine. The U.S. Treasury Department, on Friday, unveiled measures against more than 30 Russian oil service companies, including major firms such as Gazprom Neft and Surgutneftegas. The sanctions also target Russia's liquefied natural gas production facilities, including Gazprom’s LNG terminals Portovaya and Cryogas Vysotsk. In addition, the sanctions blacklist over 180 Russian vessels, including 143 oil tankers involved in the country's "shadow fleet," which handled about 530 million barrels of Russian crude last year—approximately 42% of Russia's total seaborne crude exports. The U.S. also sanctioned 23 Chinese firms linked to Russia's shadow fleet, as part of efforts to disrupt Russia's oil trade. President Joe Biden acknowledged that gas prices could increase after the sanctions, stating, "It's probable that gas prices could increase after sanctions." The sanctions are considered the most extensive imposed on Russia's energy sector to date. Oil prices surged in response, with Brent crude rising above $81 per barrel, its highest level in over four months, and West Texas Intermediate (WTI) climbing to $78 per barrel. Analysts suggest that Chinese and Indian refiners, among Russia's top customers, will need to source more oil from the Middle East, Africa, and the Americas, potentially increasing global oil prices and freight costs. Serbian President Aleksandar Vučić revealed that the U.S. demands Russia fully divest from Serbia's NIS oil company by February 25. NIS is majority-owned by Gazprom Neft (50%) and Gazprom (6.15%), with Serbia holding a 29.87% stake. Vučić described the sanctions as "heavy and serious" and intends to request the incoming U.S. administration to reconsider the decision. Russia has vowed to respond to the U.S.'s "hostile actions," warning that the new sanctions threaten to destabilize global energy markets. Hungarian Foreign Minister Péter Szijjártó expressed concern that the sanctions create serious problems for Central Europe's energy sector and could significantly raise energy prices in Europe.