The US government has announced its intention to take further steps to address the non-western market for Russian oil and gas, with a focus on maintaining a stable global energy market. A government official stated that there would be a sustained effort to enforce sanctions, aiming to disrupt certain aspects of Russia’s oil trade. Sanctions imposed by the US on Russian oil have primarily aimed to reduce revenue for the Kremlin while ensuring a consistent oil supply to stabilize prices. These sanctions have been accompanied by a price cap implemented across G7 countries, the EU, and Australia. This cap allows companies in these markets to engage in Russian oil trade within specified price ranges.
However, Russia’s attempts to diversify its oil exports by developing a fleet of “shadow vessels” have led to what US Assistant Secretary of State for Energy Resources, Geoffrey Pyatt, described as a division in global energy markets. Pyatt emphasized that while one market remains transparent and integrated, the other is characterized by opacity and unreliability. Initial sanctions primarily targeted the western market, but Pyatt highlighted the US government’s increasing efforts to disrupt Russia’s alternative export options. The objective, he stated, is to raise costs for the Kremlin to reduce its revenues, which are utilized for military purposes.
Pyatt refrained from detailing specific future sanctions but indicated a sustained effort of enforcement actions. As enforcement actions focus more on specific shipping vessels, potential measures include expanding direct action against Russia’s shadow fleet. In February, the US Office of Foreign Assets Control (OFAC) sanctioned 14 vessels owned by the Russian state-owned shipping company Sovcomflot, citing violations and deceptive activities. This move, according to experts, significantly impacted the mobility of these vessels, rendering them unusable for commercial purposes.
While such actions may push Russian oil towards mainstream companies, experts also cautioned about potential risks and challenges. These include the need for phased implementation to avoid disruptions in the shipping market and strategies to prevent circumvention of sanctions, particularly through falsifying pricing information. In response to these challenges, regulatory bodies are considering tighter measures, such as requiring detailed itemization of costs and enhancing attestations from companies engaged in oil trade.
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