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New round of US sanctions on Russia could have ripple effects into energy

Highlights

White House order targets Russian debt, technology firms

Avoids specific energy-related actions

Nord Stream 2 remains focus

  • Author
  • Chris van Moessner
  • Editor
  • Jeff Mower
  • Commodity
  • Energy Natural Gas Oil
  • Topic
  • US Policy

New York — A new round of US sanctions issued April 15 targeting Russian entities and individuals could have knock on effects into the energy space while not specifically targeting the sector, analysts said.

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The White House April 15 issued an executive order imposing sanctions aimed at "targeting aggressive and harmful activities by the Government of the Russian Federation."

The sanctions, levied by the US Treasury Department, include new prohibitions on dealing in Russian sovereign debt markets, as well as targeted sanctions on several Russian technology firms with alleged connections to Russian intelligence services. In addition, Treasury issued sanctions against 32 Russian individuals and entities for their alleged involvement in attempts to influence the 2020 US presidential elections.

Finally, eight additional Russian individuals and entities were sanctioned for their alleged actions related to Russia's ongoing occupation of parts of Ukraine and Crimea.

While the sanctions do not explicitly target Russian energy firms, the White House order, specifically the restrictions on sovereign debt purchases, could send ripple effects into the sector, analysts said.

"The [sanctions] do not target the Nord Stream 2 pipeline or Russia's oil sector. However, restrictions on US sovereign debt purchases leave open the possibility of stricter measures to come, which will likely increase Russian focus on OPEC+ cohesion and short-term prices," S&P Global Platts Analytics chief geopolitical advisor Paul Sheldon said.

"I'm not anticipating it having a huge effect on the energy sector," Confluence Investment Management chief market strategist Bill O'Grady said. "It could potentially make financing a problem as US banks are not going to be allowed to deal in Russian sovereign debt very easily."

"Today's multi-layered action does not appear to explicitly target the energy sector, although we see several energy-relevant implications," ClearView Energy Partners analysts said in a note, "today's EO may have opened the possibility of future sanctions against energy projects in Russia or in overseas joint ventures."

ClearView analysts specifically point to Section (1)(a)(i) of the order that provides a mechanism for levying additional sanctions on individuals in "any other sector of the Russian Federation economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State."

But ClearView analysts noted the sanctions avoidance of the Nord Stream 2 pipeline may point to the US taking a less aggressive posture regarding the project.

On March 18, US Secretary of State Antony Blinken issued a warning to entities involved in the Nord Stream 2 project that they risk "US sanctions and should immediately abandon work on the pipeline."

German foreign minister Heiko Maas on April 15 rejected calls for the Nord Stream 2 gas pipeline project to be halted amid increased tensions between Russia and Ukraine, warning that such action could lead to a further escalation.

Still, the lack of direct energy sanctions in the April 15 executive order could signal the White House is keeping some powder dry for further actions.

"Both the Trump and Biden administrations have made it clear that they are really not happy with Nord Stream 2," O'Grady said. "[Today's sanctions] are a bold move and maybe they didn't do anything with the energy sector because that's the other shoe to drop."

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