The Biden administration has unveiled its most extensive sanctions on Russia’s oil and gas business yet in a bid to give Ukraine and the incoming Trump admiration more leverage in widely expected ceasefire talks that may start soon, Reuters reported on January 10.

As reported by bne IntelliNews, Moscow has managed to almost completely evade the twin sanctions that were imposed at the end of 2022 and start of 2023 on Russia’s crude and refined products respectively. In particular, not a single barrel of Russian crude oil has been sold below the oil price cap of $60 thanks to Russia’s partners in Asia ignoring the sanctions and the extensive shadow fleet the Kremlin has built up that can operate outside of the sanctions regime.

The main target of the sanctions  are the state owned energy companies Gazprom Neft and Surgutneftegas, which exported about 970,000 barrels a day of oil by sea in the first ten  months of 2024, about 30% of the nation’s total flows on tankers, Bloomberg reports. Moscow-based Ingosstrakh Insurance Co. has also been included in the regime, a major maritime insurance company, which is pivotal in covering vessels moving Russian cargoes to India.

The sanction list is also expanded to cover entities supporting production and export of liquefied natural gas by Russia, steelmaking, mining and oil industry of Russia, and senior executives of Rosatom state corproration, the official said.

The new oil sanctions are hoping to change that. They target every stage of Russia’s oil production and distribution chain, from producers and intermediaries to tankers and ports. A senior Biden official described the measures as “the most significant sanctions yet against the Russian energy sector, the largest source of revenue for the Kremlin's war machine.”

In addition, 183 shadow fleet tankers have been included in the new sanctions. There are currently 135 tankers sanctioned by the European Union, UK and US, with many of them blacklisted by some combination of the three.

The US is also sanctioning Rosnefteflot, the shipping arm of the Russian oil company Rosneft. Rosneft itself is subject to some earlier sanctions and was not included in the new lists. 

The sanction list is also expanded to cover entities supporting production and exports in Russia’s steelmaking and mining industries, as well as senior executives of state nuclear corporation Rosatom.

Targeting the tankers could prove to be particularly effective. In December 2023, the US’ Office of Foreign Assets Control (OFAC) changed tack, introducing its so-called strangulation sanctions that target individual companies, banks and ships that do business with Russia, threatening them with secondary sanctions. Most of the entities that received the OFAC letters broke off relations with their Russian clients and even China and India closed their ports to the 40-plus listed Russian shadow fleet tankers, effectively taking them out of service. Now that list of tankers has been dramatically expanded to include about a third of the tankers believed to be in Russia’s shadow fleet.

“There is not a step in the production and distribution chain that's untouched,” a US official said, reports Reuters, adding, “Evasion is going to be even more costly for Russia.”

The newly sanctioned entities have until March 12 to comply with the sanctions and industry sources in India and Russia told Reuters that they anticipate significant disruptions to Russia’s oil exports.

Russian state-owned oil company Gazprom Neft dismissed the sanctions as “unjustified and illegitimate,” saying that it will continue its operations. The markets ticked up with Brent crude prices surging over 3% on the news in anticipation of the disruptions. Oil prices were back up to almost $80 per barrel after spending the last month closer to $70 on the expectations of slow global growth in 2025.

“We expect our direct targeting of the energy sector will aggravate [Russia’s growing economic] pressures,” another Biden official said.

Russia’s Central Bank of Russia (CBR) has been struggling to reduce persistent high inflation that is starting to hurt the growth outlook. As bne IntelliNews reported, in August the Bank of Russia issued a pessimistic medium-term macroeconomic outlook that forecast growth would stall this year to around 0.5% and consumption would plunge as real incomes stopped rising. The White House is hoping the new sanctions regime will only add to these problems, forcing Russian President Vladimir Putin to the negotiating table.

Biden aides briefed Trump’s transition team on the new regime, emphasising that the combination of fresh military aid and the new sanctions package will give Kyiv “considerable leverage” should negotiations begin soon. The US’ long standing policy in the conflict is to provide Kyiv with enough support to put it into the “strongest possible position before the inevitable talks begin.” US support has been limited to “some, but not enough” support so that Ukraine doesn’t lose the war, but not enough so it can actually win, as part of an escalation policy designed to avoid WWIII.

The toughest oil sanctions yet is US President Joe Biden’s parting shot in the war with Russia, but the decision on when and under what terms to lift the sanctions will rest entirely with the new Trump administration.

Incoming National Security Advisor Keith Kellogg said on January 9 that President-elect Donald Trump intends to bring the war to a close within the first 100 days in office, stepping back from Trump's earlier bombastic claims he could end the war in “24 hours.”

Any effort to reverse the sanctions would require Congressional notification, with Congress holding the power to vote against such a move. Biden officials noted that some Republican lawmakers had advocated for the new sanctions, potentially complicating any attempts to dismantle them, Reuters reports.