Obama’s latest sanctions against Russia include oil, gas firms

In response to continued unrest in Ukraine, US President Barack Obama has announced new sanctions against Russia that include—for the first time—operations of Russian state-owned energy firms.

“On top of the sanctions we have already imposed, we are designating selected sectors of the Russian economy as eligible for sanctions,” he told reporters at the White House on July 16. “We are freezing the assets of several Russian defense companies. And we are blocking new financing of some of Russia’s most important banks and energy companies.

“These sanctions are significant, but they are also targeted—designed to have the maximum impact on Russia while limiting any spillover effects on American companies or those of our allies,” Obama said.

Targeted firms include oil producer Rosneft; Gazprombank, which is affiliated with its leading state-owned natural gas firm; Novatek, the country’s biggest independent gas producer; and Vnesheconomicbank (VEB), which promotes financing for other Russian industries.

Sanctions against the three firms bar US persons from issuing new debt of longer than 90 days’ maturity, a senior US Department of the Treasury official said in a subsequent conference call. The actions came after US Sec. of the Treasury Jack Lew determined, under Executive Order 13662, which Obama signed on Mar. 20, that persons within Russia’s financial services and energy sector may be subject now to targeted sanctions.

The Rosneft and Novatek sanctions apply to debt, but not to new equity infusions. “We have not blocked the property of these companies, nor prohibited transactions with them beyond the specific financing restrictions I mentioned,” the official said. “But I want to be clear that the steps we have taken today restrict access to the US capital markets for these two major banks and two major energy firms.”

‘Step in right direction’

US Senate Republicans welcomed the moves, but said Obama should have made them sooner. “While the delay in imposing real costs on Russia has been damaging to US credibility, today’s announcement by the administration is definitely a step in the right direction,” Foreign Affairs Committee Ranking Minority Member Bob Corker (Tenn.) said on July 16.

“For months, we've been calling for sanctions against these very entities in Russia’s energy and financial sectors, and we will continue to urge the administration to ratchet up even more pressure if [Russian President Vladimir V.] Putin does not change his behavior,” Corker said.

Separately, Lisa Murkowski (Alas.), the Senate Energy and Natural Resource’s Committee’s Ranking Minority Member, said, “This is a short-term response to a crisis, which is targeted and appropriate. But we also need to take the long view and determine what steps we—as the world’s largest oil and gas producer—can take to strengthen Ukraine and Europe’s energy security.

“Strengthening our trading ties with Europe by increasing our exports of oil and gas will send a strong signal to the world that we are serious about our role as a major energy producer,” she said.

It was not immediately clear whether the new sanctions would have impacts on joint ventures the two Russian oil and gas firms have with BP PLC, ExxonMobil Corp., and other Western multinational energy companies.

Contact Nick Snow at nicks@pennwell.com.

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