Russia has slammed the new hefty U.S. sanctions on its oil industry and exports and vowed to move forward with major domestic oil and gas projects, claiming that it remains “a key and reliable player in the global fuel market.” The outgoing U.S. Administration on Friday slapped the most severe sanctions on Russia’s oil yet, designating two major Russian oil companies, Gazprom Neft and Surgutneftegas, as well as 183 vessels, dozens of oil traders, oilfield service providers, insurance companies, and energy officials. The sanctions on the oil companies are the first direct designations against Gazprom Neft and Surgutneftegas, which were sanctioned by the UK on the same day, too, as “the profits from these 2 companies are lining Putin’s war chest and facilitating the war,” as the UK government said. The latest sanctions are also cutting off Russia’s access to U.S. services related to the extraction and production of crude oil and other petroleum products. Secretary of the Treasury Janet Yellen commented that “With today’s actions, we are ratcheting up the sanctions risk associated with Russia’s oil trade, including shipping and financial facilitation in support of Russia’s oil exports.” In response to the sanctions, Russia’s Foreign Ministry said that the U.S. move “represents an attempt to inflict damage on the Russian economy at any cost, even at the risk of destabilising global markets. This move comes in the waning days of President Joe Biden’s lacklustre tenure in office.” “Naturally, Washington’s hostile actions will not go unanswered and will be taken into account as we shape our foreign economic strategy,” Russia said, adding that “Major domestic projects for oil and gas extraction, import substitution, oilfield services, and the construction of nuclear power plants in third countries will continue to move forward.” The Russian Foreign Ministry’s statement concluded with “Despite the convulsions in the White House and the manoeuvres of the Russophobic lobby in the West, seeking to drag the global energy sector into the US-initiated hybrid war against Russia, our country remains, and will continue to be, a key and reliable player in the global fuel market.” The sanctions have already started moving oil markets and the oil-purchasing strategies in Russia’s top crude oil customers, China and India. Oil prices jumped on Friday as the U.S. sanctions were announced, and Brent Crude broke above $80 per barrel to hit the highest level in three months. Indian refiners expect their supply of cheaper Russian crude to be severely crippled with the latest sanctions, refining sources in India told Reuters on Friday. India is now bracing for a major disruption to Russian oil supply, which is currently the single largest source of crude for the world’s third-largest oil importer. Alongside India, China could also lose a part of its cheap Russian crude supply, analysts say. “When it comes to buyers, China and India, in general, tend to steer clear of dealing directly with tankers and entities blacklisted by the US Treasury,” Matt Wright, lead freight analyst at Kpler, wrote in a note. The newly sanctioned tankers handled about 42% of Russia’s total seaborne crude exports. Over half of this volume was shipped to China, making up about 61% of China’s seaborne imports of Russian oil. Meanwhile, most of the remaining exports went to India, contributing to nearly a third of the South Asian nation’s total intake of Russian oil, according to Kpler’s analysis. Moreover, the new sanctions are expected to drive up Russian crude price differentials in China and India in the short term, potentially reaching parity with non-sanctioned grades of similar quality, Kpler’s Wright said. India and China have started to procure more crude from sources other than Russia and Iran, in view of the tightening U.S. sanctions on Russia and an expected clampdown on Iran’s oil exports from the incoming Trump Administration. The latest U.S.-sanctioned tankers are estimated to have transported nearly 900,000 barrels per day (bpd) of Russian crude oil to China in the past year, a Singapore-based trader told Reuters, adding that this supply is “going to drop off a cliff.”
