US Treasury issues more details on permitted Russian energy transactions

The US Treasury Department late March 2 issued more details on permitted Russian energy transactions that appear to be aimed at preventing potential sanctions overcompliance by traders wary of violating the restrictions.

"Treasury is reiterating ... that energy payments can and should continue," it said in a statement.

A waiver issued Feb. 24 -- known as General License 8A -- permits what are commonly known as "U-turn transactions," Treasury said in the updated guidance. In these trades, "payments related to energy are processed through non-sanctioned, third-country financial institutions, enabling the continuation of transactions that support the flow of energy to the market."

It gave the example of a company buying oil from a Russian company. Treasury said the buyer could route the payment through a non-sanctioned, third-country financial institution as an intermediary for credit to a sanctioned bank's customer in settlement of the transaction.

"Treasury remains committed to permitting energy-related payments -- ranging from production to consumption for a wide array of energy sources -- involving specified sanctioned Russian banks," it said.

The Biden administration said the US continues to work with allies to "keep the global energy market well-supplied."

Crude oil futures continued to climb March 2 as more buyers turned away from Russian crudes because of international sanctions, while OPEC and its allies rubber-stamp a modest 400,000 b/d output increase for April.

NYMEX front-month crude futures settled $7.19 higher at $110.60/b, while ICE front-month Brent futures climbed $7.96 to settle at $112.93/b.

ULSD led the gains, with the NYMEX front-month contract jumping 34.36 cents to settle at $3.4947/gal. NYMEX RBOB settled at $3.3083/gal, up 21.96 cents.

Highlights of US sanctions against Russia:

• Central Bank of Russia blocked from any assets held in US financial institution or intervening in foreign exchange markets.
• Disconnecting certain Russian banks from international financial messaging service SWIFT.
• Sberbank, Russia's largest bank: US banks must close any "correspondent or payable-through" accounts and reject any future transactions within 30 days.
• VTB, Russia's second-largest bank: full blocking sanctions instantly froze and blocked any assets held in US financial institutions.
• General License 8A: parties can continue energy-related transactions through six sanctioned banks -- Central Bank of Russia, Sberbank, VTB, VEB, Otkritie, Sovcombank -- until June 24. Waiver defines energy very broadly. So-called "U-turn transactions" allow payments to go through non-sanctioned, third-country banks.
• Foreign investment restrictions on 13 major state-owned firms, including gas producer Gazprom; oil producer and refiner Gazprom Neft; pipeline operator Transneft; energy financier Gazprombank; agriculture financier Russian Agricultural Bank; shipping company Sovcomflot; and Russian Railways.
• Banning exports of oil refining technology to Russia and extending all export controls to neighboring Belarus.
• Individual sanctions including against Russian President Vladimir Putin, Russian Foreign Minister Sergey Lavrov and Rosneft CEO Igor Sechin.