Russia Sanctions Arm Trump for Talks With Putin

The shadow fleet tanker Turbo Voyager off the coast of Agerso, Denmark.

Outgoing US President Joe Biden has seized the opportunity of lower oil prices and an impending period of oversupply to on Moscow.

His on Russia’s energy industry are the first serious attempt to restrict the flow of funds into the Kremlin’s war chest by curtailing exports.

The existing price-cap mechanism, introduced in 2022, hasn’t really crimped Moscow’s oil income. It was introduced amid concerns that hitting Russia’s shipments would send prices rocketing.

In targeting two major oil producers — while sparing their bigger compatriots — the Biden administration has sought to shut off a substantial part of Russia’s exports without causing too big a shock to global crude markets.

Between them, Surgutneftegas PJSC and Gazprom Neft PJSC exported about 970,000 barrels a day by sea last year. That was about 30% of Russia’s total shipments and is roughly equal to the size of the 2025 supply surplus forecasted by the International Energy Agency.

The Treasury Department also blacklisted about 180 ships, including around 160 oil tankers that have hauled Russian barrels, predominantly to China, India and Turkey.

The Russian producers and vessels that carry the oil are relatively immune to the moves, having little or no contact with the US or its financial system. For the sanctions to be effective, buyers of Moscow’s oil and the companies that handle it must believe Washington will take action against them if they continue the trade.

Sanctioning Russia’s Tankers

A total of 270 tankers have been sanctioned for carrying Russian oil

Sources: US Treasury Department, UK Treasury, European Union
Note: 68 tankers have been sanctioned by more than one entity

To that end, perhaps, the State Department announced against China’s Shandong United Energy Pipeline Transportation Co. Ltd., which it says “facilitated port calls and discharges” by a sanctioned Russian tanker last year. Think of it as a warning shot to others.

Oil prices on the news, with global benchmark Brent breaking through $80 a barrel as importers in China and India to assess the impact.

Incoming President Donald Trump has been handed a great big stick to use in whatever he initiates with Moscow to end the war in Ukraine. He shouldn’t just throw it away.

—Julian Lee, Bloomberg News