Obama May Have Just Dealt A Crushing Blow To Russia’s Oil Exploration

truther September 19, 2014 1
Brett LoGiurato

New U.S. sanctions handed down on Friday are designed to effectively “shut off” Russian oil conglomerates from oil exploration projects, U.S. officials said, in a move aimed squarely at Russia’s $425 billion-a-year petroleum industry.

Obama May Have Just Dealt A Crushing Blow To Russia's Oil Exploration

The measures are “designed to effectively shut down this type of oil exploration and production activity by depriving these Russian companies of the goods, technology, and services that they need to do this work,” a senior Obama administration official said Friday.

The official added the intention of the new sanctions was to ensure that “we have effectively shut off the capacity” of Russian oil companies to draw on U.S. expertise for deepwater, Arctic offshore, and/or shale oil exploration projects. The official stressed this was an important step because Russia’s companies did not possess the kind of technology needed to undertake the operations.

The new sanctions prohibit U.S. companies from exporting goods, services, or technology to support five Russian energy companies in exploration or production for Russian deepwater, Arctic offshore, or shale projects that have the potential to produce oil. The U.S. Treasury Department said companies have until Sept. 26 to wind down existing transactions affected by the new sanctions.

The Russian energy companies hit by the sanctions include Gazprom, Gazprom Neft, Lukoil, Surgutneftegas, and Rosneft. European companies will have similar prohibitions, under mirroring sanctions handed down by the European Union.

Mark Dubowitz, the executive director of the Foundation for Defense of Democracies and an expert on previous sanctions leveled against countries like Iran, told Business Insider it was a smart escalation in sanctions.

“The new sanctions are smart and targeted and will impact Russia’s access to Western technology and services that are needed to develop Moscow’s medium to long-term oil exploration and production capacity,” Dubowitz said.

“There will be winners and losers, including companies like Exxon and BP, but Western companies will adjust as they have to past energy sanctions against countries like Iran, Iraq, Sudan, and others. The real pain will be borne by Moscow, for whom energy is their economic lifeblood.”

exxonREUTERS/Jessica RinaldiExxon could be a big loser of the new sanctions.


Indeed, Exxon could be set to take a hit from the sanctions. In 2011, it agreed to a $500 billion joint venture to explore for oil in the Russian portion of the Arctic Ocean. And the new sanctions come just weeks after Exxon and Rosneft began drilling in Russia’s Kara Sea.

“We are assessing the sanctions. It is our policy to comply with all laws,” Alan Jeffers, a spokesman for Exxon, told Business Insider in an email.

London-based BP, meanwhile, holds a near-20% stake in Rosneft, which is the largest direct foreign investment in Russia.

The new sanctions are designed to further punish the Russian economy in an attempt to change the calculus of Russian President Vladimir Putin with respect to the situation in Ukraine. U.S. officials painted the targeting of Russia’s oil industry as a significant escalatory step, because each of the companies has either direct or close ties to the Kremlin.

For the West — and Europe especially — the move is risky, because it could ignite retaliatory measures from a government that provides a steady stream of natural gas across the continent.

U.S. President Barack Obama said Thursday that the sanctions were being imposed in response to Russia’s “actions to further destabilize Ukraine over the last month,” including an incursion of at least 1,000 Russian forces into eastern Ukraine to fight with pro-Russian separatists in eastern regions of the country. Obama also said a cease-fire reached last week has not produced “conclusive evidence” Russia has worked to de-escalate the crisis.

Here’s a map of the oil and gas fields in the Arctic Ocean on which Russia has its eyes:

Russia Arctic oilCouncil on Foreign Relations


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One Comment »

  1. Archie1954 September 20, 2014 at 3:22 am - Reply

    Delay? Perhaps! Crushing blow? No way! The US is not the only nation that has advanced oilfield technology . There are others as well and not all of them think Russia is an anathema on the World stage.

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