Rising oil prices clash with U.S. sanctions on Russian energy

Oil prices have been affected by radical American sanctions. Brent crude rose nearly 4%, reaching $81 per barrel in the previous session. Meanwhile, American West Texas Intermediate reached almost $78, Bloomberg reports.

The agency notes that the United States imposed its most aggressive and ambitious sanctions on the Russian oil industry on Friday, targeting major exporters, insurance firms, and over 150 tankers.

Dr. Benjamin L. Schmitt, an energy policy expert from the University of Pennsylvania, said the White House's restrictions on the Russian energy sector will significantly increase pressure on the Kremlin but should have been implemented at the start of the war. He added that the administration should further strengthen sanctions.

When the Joe Biden administration introduced an unprecedented set of sanctions targeting the Russian economy shortly after Russia's full-scale invasion of Ukraine, one key area remained relatively untouched—Russian energy.

The reason given at the time was concerns about rising global oil and gas prices, which, according to the White House, would fail to harm and actually help Russia in financing its aggression. Later, the U.S. and its G7 partners set a cap on the price of Russian oil transported by sea at $60 per barrel. However, this proved largely ineffective as Russia found ways to circumvent these restrictions.

A shift in approach to the Russian oil sector had to wait until the final days of the Biden administration. On Friday, the White House imposed comprehensive restrictions on over 400 entities, including two of Russia's largest oil producers (Gazprom Neft and Surgutneftegas), responsible for more than a quarter of the country's oil exports. White House officials stated that the sanctions are aimed at impacting every phase of Russian oil sales, from production to distribution and trading companies, to ports receiving Russian tankers.

In Schmitt's assessment, the new sanctions are significant but delayed.

The measures introduced on Friday, as the Biden administration draws to a close, are seen as a positive step in substantially increasing energy sanctions on Putin's Kremlin after nearly three years of devastating conflict with Ukraine. However, the expert pointed out that these actions should have been initiated at the outset of the war and, if effectively carried out, might have triggered significant macroeconomic effects on Russia, potentially pressuring it to rethink its aggression against its democratic neighbor.

Schmitt suggested that these sanctions create opportunities for the Trump administration in the face of planned negotiations to end the war. In his view, the administration should further increase pressure on Russia and "reject the gradual approach" to sanctions seen during the outgoing administration.

The incoming Trump administration must act promptly to apply the highest level of sanction pressure needed to ensure a just and enduring peace in Ukraine. Schmitt emphasized the importance of expanding the recent round of sanctions as soon as the administration assumes office.

As he added, it would demonstrate both that the U.S. remains committed to Europe's security and that it is ready to take decisive measures.

Daniel Fried, former U.S. ambassador to Poland and Atlantic Council expert, shares a similar opinion.

"This is a good farewell gift for the new administration," said the former diplomat. "If Trump’s people are wise, they should take immediate advantage of it." In his view, the new sanctions are severe and can potentially blow Russia's economy significantly.

He also noted that the timing of these measures is related to the United States significantly increased oil production in recent years and the post-election period when oil and gas prices are less significant in domestic politics than during an election campaign.