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US Treasury exempts energy payments from Russian Central Bank sanctions until June 24

Highlights

Waiver defines 'energy-related' deals broadly

Russian oil flows changing without formal bans

White House still seeking to minimize energy impacts

Energy payments through the Central Bank of Russia can continue until June 24 under a waiver issued Feb. 28 by the US Treasury Department at the same time it imposed significant sanctions blocking all other transactions with the central bank.

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The waiver gives an extremely broad definition of "energy related," listing the extraction, production and refining of any petroleum products as well as other commodities capable of producing energy, such as coal, wood, agricultural products for biofuels, uranium, and electricity of all kinds.

The US, Canada and European allies announced Feb. 26 plans to sanction the central bank and disconnect select Russian banks from the international payment messaging system SWIFT.

The latest waiver does not address how energy transactions will be treated by a SWIFT ban, despite the White House saying Feb. 25 it was looking for ways to do so.

The Biden administration has not taken direct energy sanctions off the table but is still trying to "maximize the impact and the consequences on President Putin while minimizing the impact on the American people and the global community," White House press secretary Jen Psaki said Feb. 27.

Discounts for Russian crude grades were growing even without formal bans or embargoes, as banks and traders seek to back away from sanctions exposure, Bob McNally, president of Rapidan Energy Group, said Feb. 27.

Even with carve-outs for energy, the sanctions have already led to buyer reticence, which likely contributed to higher Brent crude futures and steep discounts for Russian Urals barrels, said Kevin Book, managing director of ClearView Energy Partners.

"In our view, still-evolving Western plans to bar 'selected' Russian banks from the SWIFT financial messaging network could amplify sanctions-related confusion and risk-aversion, particularly if the system offers no easy way to differentiate energy transactions," Book said Feb. 28.

Highlights of latest 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 8: six sanctioned banks—Central Bank of Russia, Sberbank, VTB, VEB, Otkritie, Sovcombank—can continue energy-related transactions until June 24. Waiver defines energy very broadly.
  • 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.
  • Individual sanctions including against Russian President Vladimir Putin, Russian Foreign Minister Sergey Lavrov and Rosneft CEO Igor Sechin.