The US will work with Germany to block the Nord Stream 2 gas pipeline and impose sanctions against Russian bank VEB, US President Joe Biden said Feb. 22 in announcing the "first tranche" of penalties after Russian President Vladimir Putin sent troops into eastern Ukraine.
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Biden also promised to sanction Russian sovereign debt, military banks and oligarchs.
"That means we've cut off Russia's government from Western financing," he said in televised remarks. "It can no longer raise money from the West and cannot trade its new debt on our markets or European markets either."
The US Treasury Department released details of additional restrictions on Russian sovereign debit and sanctions against the Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and Promsvyazbank Public Joint Stock Company (PSB), along with 42 of their subsidiaries.
Five Russian commercial vessels, including oil tankers the Linda and Pegas, appeared on Treasury's list of blocked entities.
Eye on energy supplies
Sanctions experts described the announced measures as a middle ground that gives the US more room to maneuver.
"If Russia goes further with this invasion, we stand prepared to go further with sanctions," Biden said.
Biden warned that the conflict could raise energy prices but said the administration was "closely monitoring energy supplies for any disruption."
Crude prices continued to rise Feb. 22 but remained tempered on the possibility of a breakthrough in the Iranian nuclear talks.
After retreating from larger gains earlier in the day, NYMEX March WTI still rose by $1.28/b to settle at $92.35/b and ICE April Brent was $1.45 higher at $96.84/b.
As for refined products, NYMEX March RBOB jumped 4.12 cents to settle at $2.7108/gal and March ULSD was 3.73 cents higher at $2.8188/gal.
Russia's 'energy weapon'
Biden's promise to impose additional sanctions comes as US lawmakers from both parties called for more severe economic penalties against Russia than the limited measures announced Feb. 21.
Concerns about economic blowback may have also "stayed Washington's hand" said Kevin Book, managing director at ClearView Energy Partners.
"Moscow could retaliate by firing its 'energy weapon,' and even a modest curtailment of Russian energy exports could accelerate rising energy costs and contribute to inflation," he said.
Russia was the No. 3 oil supplier to the US in November after Canada and Mexico, US Energy Information Administration data showed Jan. 31, as the Ukraine crisis threatens to disrupt the flows.
Platts Analytics expects any disruption in the Russian crude to have a minor effect, as US refiners could backfill by easing exports of US Gulf Coast sour crudes, such as Mars. Lower US imports of Russian oil feedstocks would have a bigger impact, but Gulf Coast refiners could run Canadian or Latin American heavy grades at the cost of margins.
No to Nord Stream 2
German Chancellor Olaf Scholz said earlier Feb. 22 that Gazprom's 55 Bcm/year Nord Stream 2 pipeline to Germany, which was completed in September, could not be certified after Putin's latest escalation.
"I have asked the economy ministry to re-analyze [our] security of supply," Scholz said. "The certification cannot take place now."
The protracted certification process for Nord Stream 2 has been a significant contributor to the recent gas price strength in Europe. The Kremlin has repeatedly said that approval of Nord Stream 2 and gas flows through the new pipeline would help ease the tightness in the European gas market.
The TTF day-ahead price was assessed at Eur71.60/MWh on Feb. 21, but prices surged again on Feb. 22 after Putin ordered troops into eastern Ukraine and Scholz's comments on Nord Stream 2.