US President Joe Biden 'lifts' Russian oil embargo: Last ditch effort

(CLO) Before leaving office, outgoing US President Joe Biden imposed the strongest sanctions package ever targeting Russia's oil and gas revenue, aiming to create leverage to help Ukraine in upcoming peace negotiations.

On January 10, the US Treasury Department announced sanctions against Gazprom Neft and Surgutneftegas, companies that explore, produce and sell oil. In addition to major oil and gas producers, the US also targeted more than 30 oilfield service providers and insurance companies linked to Russia.

The sanctions also target 183 vessels that have transported Russian oil, many of them part of the so-called “dark fleet” of older tankers operated by non-Western companies.

The US Treasury Department also revoked a provision that exempted Russian banks from sanctions that mediate energy payments. The measures allowed a pause until March 12 for sanctioned entities to complete energy transactions.

It can be said that these are the toughest sanctions against the Russian energy sector. In a press conference, the representative of the US Treasury Department said that the main goal of this large-scale stimulus package is not only to reduce income, but also to destroy Russia's production capacity, as well as to stimulate importers to seek alternative sources of supply.

An oil and gas facility. Photo: Gazprom

How are Russia's energy industry and the global oil market affected?

Gazprom Neft said that over the past two years, the company has been preparing for various negative sanctions scenarios. TASS quoted a source in the company's press service as saying that since 2022, Gazprom Neft has been subject to a number of unilateral foreign sanctions, so these restrictions are taken into account in the company's strategy. "The company will continue to operate and maintain business stability," the company said.

According to Stanislav Mitrakhovich, a leading expert at the Russian National Energy Security Fund, the new restrictions imposed by the US could increase costs in terms of technological re-equipment, the number of intermediaries between importers and increased discounts on Russian crude. However, the Russian energy industry will overcome this challenge; because this is not the only time the embargo has been imposed. According to Argus, the current discount is $13/barrel, but by 2022, the discount will be more than $30/barrel.

Meanwhile, Alexander Frolov, Deputy Director General of the Russian National Energy Institute, said that restrictions on specific oil companies will require Russia to restructure some processes. “From the beginning of 2022, sanctions were immediately imposed on the oil refining industry, and the supply of technology, equipment and services to the Russian oilfield services industry was limited. Now the restrictions no longer apply to the entire industry, but to individual enterprises. Moreover, secondary sanctions are possible,” Alexander Frolov said, according to Izvestia.

According to Alexander Frolov, over the past three years, Russian oil companies have had to struggle to adjust their production processes and business strategies to suit the new context, the reality of being surrounded by embargoes.

For the global oil market, the new US sanctions against Russia will have negative impacts, especially in terms of fluctuations in world oil and gas prices. However, experts say the extent of the impact will depend on the decision to maintain or cancel to some extent by the upcoming Donald Trump administration.

Alexander Frolov believes that the new US President will find it difficult to accept oil prices at $120/barrel. For Russia, this is a "gift" because the energy industry is a key industry and brings in the majority of the country's national budget. However, the increase in fuel prices in the US will hardly satisfy local people. At that time, the level of trust of US voters in the new President Donald Trump will inevitably be affected.

The purpose behind the US sanctions package

In November 2024, amid escalating tensions between Moscow and Washington, the US introduced a package of sanctions against the Russian banking sector. Currently, the Russian energy sector is also under “suffocating” pressure.

Analysts say the increased pressure on sanctions against Russia from the US in recent months may be due to the upcoming change of power in the White House. First, President-elect Donald Trump made statements pledging to quickly resolve the conflict in Ukraine, which seems to have not been "satisfactory" to the current administration of President Joe Biden and Ukraine.

Second, Mr. Trump publicly expressed his willingness to talk to Russian President Vladimir Putin, while accusing the administration of President Joe Biden of "adding fuel to the fire" of the Ukraine crisis and dragging NATO countries into this conflict.

World oil prices are unstable after the US embargo on Russian oil. Photo: GI

In addition, after the US Congress officially recognized the results of the presidential election on January 6, Mr. Trump talked about the power transition process not going as smoothly as promised. Observers said that it is not impossible that Mr. Trump wanted to "hint" at the tough actions of the outgoing administration, including new sanctions, providing weapons to Ukraine and allowing the Ukrainian army to use long-range US missiles to attack Russian territory.

According to Dmitry Novikov, First Deputy Chairman of the International Affairs Committee of the Russian State Duma, the outgoing administration of President Joe Biden is trying to leave a difficult legacy for his successors. In the current context, the administration of President Donald Trump will take a long time to restructure and will have difficulty in resolving domestic and foreign policy priorities. This will lower the prestige of the Republican Party, and on the contrary, strengthen the position of the Democratic Party in the next federal election.

In addition, if President Donald Trump wants to partially lift the embargo on Russia, he will need to get the approval of the US Congress. If this is disadvantageous for Washington, it is possible that Mr. Trump will be dragged into legal issues related to his “close relationship” with Russia, as he experienced because of the accusation of Russia interfering in the US election during his first term.

According to Dmitry Novikov, the imposition of new sanctions is, in principle, a continuation of the general line established by the recent US administration. The appearance of President Donald Trump will not mean a positive change in US-Russia relations and the Trump administration will seek to maintain its dominance in the international arena. In fact, during his first term, Mr. Trump also imposed many sanctions on Russia and made many decisions that escalated tensions in relations between the two powers.

Hung Anh

Source: https://www.congluan.vn/tong-thong-my-joe-biden-trut-goi-cam-van-dau-khi-nga-no-luc-cuoi-cung-post330049.html