Why the US imposed the largest embargo ever on Russian oil

(CLO) On January 10, the administration of outgoing US President Joe Biden announced the largest sanctions package ever aimed at Russia's oil and gas revenue.

The move is aimed at cutting off Russia's revenue and at the same time giving Ukraine and the incoming US administration of President-elect Donald Trump leverage in pushing for a deal to end the conflict.

US President Joe Biden. Photo: Gage Skidmore

The new sanctions are expected to inflict heavy damage on the Russian economy, which has been hit hard by the protracted war in Ukraine. Ukrainian President Volodymyr Zelensky said on social media that the measures would be a "hard blow" to Moscow: "The less oil income Russia has, the sooner peace will be restored."

According to White House economic and national security adviser Daleep Singh, these are the strongest sanctions ever aimed at the Russian energy sector – the sector that brings the largest source of revenue to the administration of President Vladimir Putin.

The US Treasury Department has imposed sanctions on major Russian oil companies Gazprom Neft and Surgutneftegas, along with 183 tankers belonging to the “shadow fleet” – most of which are operated by non-Western companies. Russia’s oil trading networks are also on the sanctions list.

In particular, the US has abolished the exemption for energy payment transactions through the Russian banking system, making oil trading more difficult.

A US official said that if fully implemented, the sanctions could cost Russia billions of dollars a month: "No part of Russia's oil production and distribution chain will be exempt from sanctions. This will make evasion much more costly for Moscow."

In response, Gazprom Neft said the sanctions were "unjustified and illegal" and said it would continue to operate normally.

The sanctions give the parties involved until March 12 to complete energy deals. However, sources in the Russian oil industry and Indian refineries warn that the measures will severely disrupt Russian oil exports to India and China – Moscow’s two biggest customers.

Just before the official announcement, world oil prices increased by more than 3%, with Brent crude oil nearly touching the $80/barrel mark, as information about the embargo package spread in the market.

However, the US insists that global oil supplies will not be affected too much thanks to new oil production from the US, Guyana, Canada, Brazil and possibly the Middle East. US Assistant Secretary of Energy Geoffrey Pyatt stressed: "We are no longer constrained by global oil supplies as we were when the previous price cap mechanism was imposed."

The US imposed sanctions in November on major Russian banks, including Gazprombank, Russia’s largest global energy trader. The measures sent the Russian ruble to its lowest level since the start of the war and forced the Russian Central Bank to raise interest rates to a record high above 20%.

After January 20, it will be entirely up to President-elect Donald Trump whether to maintain or ease the sanctions. However, according to regulations, Mr. Trump will have to notify the US Congress if he wants to lift these sanctions and Congress has the right to vote against it.

Many Republican lawmakers have called on President Biden to impose these sanctions, so Mr. Trump's ability to unilaterally lift them will face many obstacles.

Mr Trump’s return has raised hopes for a diplomatic solution to the war, but also raised concerns in Kiev that a quick peace deal could see Ukraine cede territory. Some of Mr Trump’s advisers have proposed plans that would allow Russia to permanently control parts of Ukraine.

Cao Phong (according to NYTimes, Newsweek, Reuters)

Source: https://www.congluan.vn/ly-do-my-ap-goi-cam-van-lon-nhat-tu-truoc-toi-nay-doi-voi-dau-mo-nga-post329926.html