Page 27 - bne IntelliNews magazine February 2025

bne February 2025
Cover Story I 27
The Biden administration imposed the harshest ever oil sanctions
on Russia on January 10, which
immediately roiled the international energy markets. Russia’s major oil producers, insurance companies and 183 members of its shadow fleet were placed on the Specially Designated Nationals and Blocked Persons (SDN) Lists in an effort to “significantly reduce Russia’s oil revenues".
Ukraine’s supporters have been calling for these tougher oil sanctions for all of the three years of the war, but the White House has held off until US President Joe Biden’s last week in office for fear of causing a spike in oil prices.
Prices soar
Oil prices eased on January 14 but remained near four-month highs as the impact of the US’ harsh January
oil sanctions on Russia hit the market. Brent oil rose to $80.73 as of January 14 from an average of $70 in December.
Supertanker freight rates also jumped following the announcement after the US expanded sanctions on Russian oil trade. Traders rushed to book ships to pick up supplies from other countries to go to China and India before the sanctions kick in in March, Bloomberg reports.
Russia has already been paying a premium to book international oil
“Chinese and Indian refiners are already hunting for alternative fuel supplies as they adapt to the new sanctions regime on Russian producers and tankers”
As bne IntelliNews reported, Western
oil sanctions have largely failed
and experts believe even these
latest sanctions will not reduce the Kremlin’s oil tax take, but they will cause significant disruptions, drive up transaction cost and widen the discount Russia has to offer on its crude prices that will hurt the Russian economy.
Despite the existing regime, Russia’s oil taxes jumped by a third in 2024 to RUB9.19 trillion ($89.4bn), which made up a quarter of its income and almost entirely covered the defence spending on its own.
The new oil sanctions have sent shock waves through the global market
that have been exacerbated by an attempt by Kyiv to destroy Russia’s
last remaining gas pipeline to Europe, TurkStream, on January 13, and the first gas sanctions that may be included in the sixteenth sanctions package due to be introduced on the third anniversary of the start of the war in Ukraine on February 24.
tankers due to sanctions, but those costs will only increase now, marginally decreasing profits, but that will be offset by the accompanying rise in oil prices as a result of the sanctions.
Chinese and Indian refiners are already hunting for alternative fuel supplies as they adapt to the new sanctions regime on Russian producers and tankers.
Sanctions could take 700,000-800,000 barrels per day (bpd) of Russian
crude off market out of the total of 5mn barrels that Russia exported in 2024, analysts say. However, with an estimated 2mn barrels oversupply expected this year, removing this amount of Russian oil from the market is not expected to push up prices dramatically.
Of the 183 tankers targeted in the new sanctions, most are a part of Russia’s shadow fleet that is made up of some 400 vessels, although other estimates put the total as high as 800 tankers, if freelancers are included.
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