West must keep adapting Russia sanctions and focus on enforcement, analyst says

11 months ago

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00:00Next, the Kremlin is warning that the latest US sanctions on Russia's oil sector will destabilise

00:05the global energy market.

00:07On Friday, the Biden administration, in coordination with the British government, imposed sweeping

00:12sanctions directly hitting hundreds of targets, including two of Russia's biggest oil companies.

00:18The penalties also go after 183 vessels that trade oil as part of Russia's so-called

00:24shadow fleet of tankers.

00:26The move, seen as Biden's final blow to Russia before leaving office, is aimed at cutting

00:31off funding for Moscow's war in Ukraine.

00:34Veronica Behel has more.

00:38To cripple Moscow in its war with Ukraine, the Biden administration has taken decisive

00:43action in its final days in the White House.

00:46Slapping its toughest sanctions yet on Russia's oil and gas sector, Vladimir Putin's key revenue

00:51source.

00:52The move hits a plethora of entities and individuals.

01:17Directly targeting Russian energy giants Gazprom Neft and Surgut Neftegus, as well as over

01:22two dozen of the pair's subsidiaries based in Kazakhstan, Kyrgyzstan and Luxembourg,

01:27and a host of Russian energy officials.

01:30The sanctions also blacklist what it calls Moscow's shadow fleet, a group of over 180

01:35tankers used to ship oil globally, routinely used to evade sanctions and help Russia's

01:40oil exporters elude the $60 per barrel price cap imposed by the West.

01:46The vessels are often managed by opaque entities in countries that aren't participating in

01:50the sanctions, often unclear with who is behind them, and the Kremlin has so far avoided

01:55commenting on the shadow fleet's existence.

01:58Several of these vessels are controlled by Russia's state-owned shipping company, Sovconflot,

02:03also affected by the new penalties, as are a host of Moscow's seaborne oil exports and

02:08insurance companies.

02:10The US has also gone after opaque traders of Russian oil, like the Black Pearl network,

02:15a major Russian crude oil trader, which has likely sold over $2 billion worth of Russian

02:20crude oil and oil products since 2023.

02:24Let's get some analysis on this now.

02:27We can speak to Benjamin Godwin, who is a partner at PRISM Strategic Intelligence, an

02:32investment advisory firm.

02:34Benjamin, good to have you on the programme, thanks so much for joining us.

02:38So Russia's oil industry is arguably the Kremlin's largest and most important source of revenue.

02:43Lay out for us how far-reaching these new sanctions are.

02:48These are pretty big and they've been a long time coming.

02:52The Biden administration has been very concerned about the impact of sanctions on the global

02:56oil market, so it's really taken its time before unrolling this.

03:01Oil exports are about 35% of 30% of Russian exports overall.

03:06So it's huge for Russia and it's a pretty big part of global energy demand.

03:11So it's a huge supplier to China and India.

03:16About 50% of Russian exports go into China, 35% into India.

03:21So it's a big move targeting not only the producers, but the shadow fleet, potentially

03:29a third of the entire shadow fleet as it exists at the moment.

03:32But of course, as we've seen in the past, Russia will be able to adapt to these and

03:36will already be undertaking measures to try and subvert the sanctions as they currently

03:41stand.

03:42Well, it's only been a few days since these sanctions have been imposed and we've received

03:46reports saying that three ships said to be part of Russia's shadow fleets are reportedly

03:51stranded floating off the coast of China.

03:55Give us your insights on what kind of immediate impacts you're seeing already from these sanctions.

04:01Yeah, absolutely.

04:03We're seeing these kind of disruptions, but more widely on the global market, we're not

04:07seeing the kind of disruptions that perhaps Vladimir Putin would like to warn about.

04:14Certainly us in the analyst community, as well as the U.S. government, have been quite

04:17clear that there's a lot of oil coming online this year, particularly from the U.S. and

04:22the U.S. recently revised up its production estimates.

04:27And of course, with the incoming Trump administration, we imagine that oil is going to flow even

04:31more freely from the United States.

04:33So the global market impact hasn't been huge as it stands.

04:38And if estimates are met from the U.S. and other markets like Guyana, Brazil, Canada,

04:44then the impact should be relatively negligible in terms of the oil price or at least manageable

04:50for consumers.

04:52And we may see a gradual shift of these key consumers, China and India, shifting to the

04:58Middle East, to Latin American suppliers rather than Russia.

05:03And this is, of course, not the first time that the West has gone after Russia's oil

05:07industry.

05:08We had that price cap come in last month.

05:11It didn't pay as much of a blow as the West was hoping that it would.

05:16Tell us about how these new sanctions will really deliver that last punch that Biden

05:21is hoping to pay.

05:24I think we have to think of sanctions as more of a cat and mouse game rather than a decisive,

05:28massive blow that will, say, shut down the Russian oil industry or the Russian gas industry.

05:33So for example, at the end of 2022, a lot of measures were brought in that probably

05:37cost Russia about eight billion dollars a month in early 2023.

05:43But those losses have been mitigated by new efforts to build up the shadow fleet and other

05:48ways of subverting these sanctions.

05:49So if you want to maintain long term pressure on Russia and the Russian energy industry,

05:55you're going to have to keep adapting your sanctions and focusing on sanctions enforcement.

06:00And I think this is going to be the concern with the Trump administration.

06:04We may well see a maximum pressure campaign, but we also anticipate perhaps that the Trump

06:08administration won't be as effective at enforcing these sanctions, particularly given that it's

06:14unlikely to be as deeply in cooperation with the European Union as the Biden administration.

06:20Well, Trump has said that he wants to use sanctions as little as possible when he gets

06:24back into the White House.

06:25He's also said that he wants to get Russia and Ukraine back at the negotiating table

06:30to end the war in Ukraine.

06:32These sanctions will be an important piece of leverage, won't they, going into those

06:36negotiations?

06:38Oh, yeah, absolutely. And I think that's, you know, as your commentator said in the

06:41piece, that's one of the reasons why the Biden administration is doing this now, as well

06:45as a bunch of other measures, is to sort of tie the Trump administration

06:51into the process of sanctions against Russian energy companies.

06:56But, I mean, there are signs coming out of the Trump administration that in order to

07:00get Russia to the table and negotiate on terms that, say, the US, the EU and

07:06Ukraine could accept, that the Trump administration would use sanctions or

07:12at least the threat of additional sanctions to bring Russia to the table.

07:16But I think your analysis is correct.

07:18The long term commitment to sanctions, that's harder to say in terms of the Trump

07:22administration.

07:24Benjamin, great to get your insight.

07:25Thanks so much for joining us here on Prime News Paris.

07:27Good to have you with us.

07:29Thank you very much.

West must keep adapting Russia sanctions and focus on enforcement, analyst says

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