US blocks oil imports from Russia/UK ‘phases them out’
Economic measures continue to mount against Russia as its invasion of Ukraine continues, amidst condemnation of the bombing of a children’s hospital in Mariupol, and predictions that the Kremlin, frustrated by the lack of military progress, may resort to the use of ‘non-conventional’ weapons.
On 8 March, US President Joe Biden signed an executive order that bans the importation into the United States of Russian crude oil and certain petroleum products, liquefied natural gas, and coal, as well as new US investment in Russia’s energy sector, to ‘ensure that American companies and American investors are not underwriting Vladimir Putin’s efforts to expand energy production inside Russia.’
It also prohibits US persons from ‘financing or enabling foreign companies that are making investment to produce energy in Russia.’
In anticipation of the import block, there had been speculation that such a move would send the price of oil through the figurative roof. The US government has, however, attempted to mitigate its effects by negotiating production increases from other oil-producing countries and increasing domestic production.
The White House said, in a briefing which accompanied the executive order,
‘President Biden made clear that he will keep working to mitigate the pain American families feel at the pump and reduce our dependence on foreign oil and fossil fuels: the Administration has already committed to releasing more than 90 million barrels from the Strategic Petroleum Reserve this fiscal year, with an emergency sale of 30 million barrels announced just last week.
‘After intensive around-the-clock coordination and consultation by President Biden, the International Energy Agency (IEA) Member countries agreed to a collective release of an initial 60 million barrels of crude oil from our strategic petroleum reserves, with the United States committing half of that in the emergency sale. We are in conversations with a range of energy producers and consumers on further steps we can take to ensure a stable global supply of energy.’
The US government has also issued FAQs and a general licence which authorises the import of oil that has already been contracted for.
Russia, meanwhile, has said that it will respond with ‘painful’ countermeasures, expected to include a ban on the export critical raw materials, however, details have yet to be revealed.
Venezuela could be a surprise winner from the current state of affairs. The US government is reported to have sent an official delegation to Venezuela to discuss possible sanctions relief in exchange for conditions including free and fair elections – a scenario that Washington DC-based AML expert Alvaro Ruiz Ostos said could have been lifted from the pages of a Tom Clancy thriller.
This, said Ruiz, would bring ‘a new challenge (and a historic opportunity) to the Maduro regime.’ Ruiz added, ‘The truth is that the State Department has been gradually relaxing the sanctions regime, and right now, it is possible to do a handful of business activities with PDVSA, the state oil company, without facing a penalty. Companies like Chevron have managed to obtain licenses to operate, and recently, the import of liquified petroleum gas has become a more plausible option for US investors.’
UK measures
The United Kingdom, meanwhile, has said it is introducing a ‘phasing out’ of imports of Russian oil. The UK government said that this ‘would not be immediate, but instead allows the UK more than enough time to adjust supply chains, supporting industry and consumers.’
It also said that Russian oil ‘is already being ostracised by the market, with nearly 70% of Russian oil currently struggling to find a buyer, and in a competitive global market demand will quickly be met by alternative suppliers.’
See:
The OFAC website links to the Executive Order, FAQs and General Licence 16:
https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220308
The UK’s statement on phasing out Russian oil imports is at:
https://www.gov.uk/government/news/uk-to-phase-out-russian-oil-imports
