WASHINGTON, D.C. — The Biden administration has slapped sanctions on two of Russia’s largest oil producers, a major liquefied natural gas project, and more than 100 tankers in its “shadow fleet” in what U.S. officials say are the most significant economic measures yet against the country.
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The sanctions, announced by the White House on January 10, days before President Joe Biden leaves office, aim to further squeeze Russia’s ability to finance its invasion of Ukraine, now in its third year. Oil is Russia’s most important source of revenue, accounting for more than a third of the federal budget.
The new measures target Gazprom Neft and Surgutneftegas, Russia’s second- and fourth-largest oil producers, as well as 183 vessels transporting Russian oil and oil products to foreign markets. The Biden administration also sanctioned “opaque” traders of Russian oil, more than 30 Russia-based oilfield service providers, and more than a dozen leading Russian energy officials and executives.
“These measures will collectively drain billions of dollars per month from the Kremlin’s war chest and, in doing so, intensify the costs and risks for Moscow to continue its senseless war,” Daleep Singh, deputy national security adviser for international economics, said in a statement.
Britain joined the United States in sanctioning the two oil companies, which combined produce more than 1 million barrels a day. Their majority-owned subsidiaries, such as Gazprom Neft’s Serbian unit NIS, also come under the sanctions.
“Putin is in tough shape right now, and I think it’s really important that he not have any breathing room to continue to do the god-awful things he continued to do,” Biden told reporters at the White House.
Ukrainian President Volodymyr Zelenskiy said he spoke with Biden by phone and thanked him for his “unwavering support” of Ukraine’s independence and for the “vital role the United States has played in uniting the international community.”
Earlier in a statement on X, he thanked the United States and Britain for the new measures, saying he expected them to cut income for the Kremlin.
“The less revenue Russia earns from oil and other energy resources, the sooner peace will be restored,” he said.
The latest measures are meant to complement sanctions previously slapped on Russia’s energy sector.
In December 2022, the United States and Europe imposed a price cap of $60 a barrel on Russian oil sold with the use of Western ships and insurance.
The novel measure aimed to trim Kremlin revenues while also keeping Russian oil flowing to global markets to avoid a price spike at a time of surging global inflation.
Western firms dominated the oil transportation industry, pushing Russia to scoop up hundreds of tankers to circumvent the sanctions.
Within two years, Russia had more than 300 vessels in its “shadow fleet” transporting oil mainly to India, China, and Turkey at prices exceeding the cap.
As a result, Russia has continued to reap hundreds of billions of dollars in energy revenue despite the sanctions. Ukrainian officials and Western supporters of Kyiv had been urging the Biden administration for months to impose greater measures on Russia’s oil industry and tighten and enforcement.
In the statement, Singh defended the decision to move ahead with additional energy sanctions now, just 10 days before the Biden administration leaves office, saying oil supply is forecast to exceed demand this year.
Some experts have said that Biden was holding back on tougher sanctions against Russia until after the November 5 U.S. presidential election lest they hurt his party’s chances of winning. Rising prices for many goods, including energy, were a major issue during the campaign. Biden’s Democratic Party lost the presidency and both chambers of Congress.
Following the announcement of the latest sanctions, oil prices jumped more than 3 percent to their highest since October amid concern they could curtail Russian supply. Russia is currently the largest exporter of oil and oil products, shipping more than 6.5 million barrels to global markets a day.
LNG Project Targeted
The sanctions announced on January 10 also target a major liquefied natural gas (LNG) project in Russia’s Arctic, those involved in Russia’s metals and mining sectors, and senior officials from Rosatom, the state-owned builder of civilian nuclear power plants.
Singh said the new sanctions are intended to strengthen Ukraine’s hand in any negotiations that take place to end the war.
Republican President-elect Donald Trump has said he wants to start negotiations to end the war soon after he takes office on January 20 but has not given any details on timing.
A senior Biden administration official declined to say whether the incoming Trump administration supported the latest round of sanctions. However, the official said a number of Republican members of Congress had called on the Treasury Department to impose the type of sanctions included in the January 10 announcement.
Chris Weafer, a Russia energy expert and founder of Macro-Advisory, said the impact of the latest round of sanctions will depend on whether China, India, and Turkey observe them. Russia sells its oil to those countries at a discount to global prices.
“Despite this escalation in sanctions, it is not clear that they will work. It entirely depends on those countries. Will they give up cheap Russian oil in order to buy more expensive oil from someone else? They haven’t done it thus far,” he told RFE/RL.
Nonetheless, he said sanctions are now at their “most dangerous level” for the Russian economy since the Kremlin launched the invasion of Ukraine in February 2022.
The latest sanctions come on the heels of stinging measures imposed by the United States on Russia’s financial sector.
In late November, the Biden administration designated Gazprombank, one of Russia’s largest lenders, and more than 50 other financial institutions, further cutting the country off from U.S. financial markets and increasing pressures on the economy. Those measures forced the Russian Central Bank to significantly weaken the currency.
Weafer said Trump could use the latest measures on the energy industry as leverage to get Russian President Vladimir Putin to the negotiating table.
“Nobody in Moscow is going to panic over these sanctions just yet because the U.S. administration is about to change. They are a further complication but no one is going to push any panic buttons until after they hear what Trump has to say,” Weafer said.
One of the officials on the call said the measures, combined with previous sanctions, “provide the next administration a considerable boost to their and Ukraine’s leverage in brokering a just and doable peace.”
