Experts: US Could Follow New Russia Energy Sanctions With Tougher Measures, Secondary Sanctions
The U.S. should follow up its new Russia energy sanctions against Rosneft and Lukoil with more designations in the coming weeks, said John Herbst, senior director of the Atlantic Council’s Eurasia Center, in a commentary published by the Atlantic Council. To push for an end to the Russia-Ukraine war, Trump should “prepare for a monthslong ratcheting up of pressure on Moscow,” Herbst said. “At the moment, all [Russian President Vladimir] Putin sees for sure is another round of sanctions. It must not be the last round.”
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Daniel Fried, an Atlantic Council distinguished fellow, noted that the new Russia energy sanctions aren’t a “maximal blow.” The U.S. could pursue tougher measures, such as joining the EU and other Group of Seven nations in lowering the price cap on Russian oil, targeting more Russian shadow fleet vessels and sanctioning the ports that service them.
But Fried also said the new sanctions are “a strong move.” They could “put even more downward pressure on Russian oil revenues” and push more foreign purchasers to look for alternative sources of oil.
Kimberly Donovan, director of the Atlantic Council’s Economic Statecraft Initiative within the GeoEconomics Center, said the sanctions could cause a “direct and immediate impact on Russia’s oil profits.” She also noted that the designations carry the threat of secondary sanctions, including on foreign financial institutions that continue to process transactions involving the energy companies.
The general license issued by the Treasury Department that allows for a wind-down of transactions with Rosneft and Lukoil, which expires Nov. 21, will give China, India and other countries buying Russian oil “time to decide if they will stop importing Russian oil or face the threat of secondary sanctions by the United States,” Donovan said.
Larry Ward, a trade lawyer with Dorsey & Whitney, told us it's unclear whether the U.S. will choose to enforce secondary sanctions against foreign countries and companies that continue to do business with Rosneft and Lukoil. But "given tensions that Washington has with China and India right now, it is easy to see how the Trump Administration might use secondary sanctions to further pressure China and India into trade negotiations," he said in an email.
Privately owned Reliance Industries, the top Indian buyer of Russian crude oil, will stop importing oil under its deal to buy nearly 500,000 barrels per day of crude from Russian oil major Rosneft, Reuters reported Oct. 23. The decision reportedly came after Rosneft was sanctioned by the U.S. this week.
The Financial Times reported that China's largest state-backed oil companies also had paused purchases of Russian crude oil after the sanctions, though smaller independent Chinese refiners are continuing.