Paweł Krawczyk

Alexander Pomazuev, head of International Advocacy, The Anti-Corruption Foundation (FBK), about the US sanctions that were introduced in regard to “just two” #Russia oil companies. I have only translated the text from Russian:

Two of Russia's largest oil companies, Lukoil and Rosneft, were hit with comprehensive US sanctions last night, which will significantly hamper their operations on the global market. Although Lukoil and Rosneft themselves were the headline names, 34 other companies associated with them in the oil sector, including oil refineries, field development, production and others, were also included in the long list. The full list is available here: https://ofac.treasury.gov/recent-actions/20251022

The sanctions affected approximately 50% of oil production (about 30% — Rosneft, about 15% — Lukoil) and approximately 50% of exports. This is a colossal amount.

In fact, all companies that are not directly listed by the US Treasury but are more than 50% owned by sanctioned individuals are also subject to sanctions.
The worst thing for companies is that these are US sanctions, which are global in nature. Lukoil and Rosneft's counterparties around the world are forced to comply with them. If their counterparty ever intends to conduct transactions in dollars, which remain the world's main currency, the US considers itself entitled to compel such a company to comply with the restrictions.

A hypothetical oil refinery in India can afford not to comply with EU sanctions, closing itself off from the European market. But it cannot exist without coming into contact with dollars and the US financial system.

US Presidential Executive Order 14024, adopted by Biden and used for sanctions, prohibits any transactions with sanctioned companies, financial transactions, and the provision of services. Organised exchange trading in company shares and debt instruments is effectively blocked. Companies are forced into a grey area, deprived of the opportunity to operate under their own name, and will be forced to use intermediaries and pay them for additional risks.

The companies' assets in the US will be blocked, and outside the US and Russia, the companies' assets will become toxic. They cannot be sold without risking secondary sanctions, they cannot be operated normally due to problems with counterparties, but they will have to be maintained with enormous problems due to the risks for contractors.

The bigger the victim of the sanctions, the more sensitive the blow. A fly-by-night company will disappear, and a new one will appear in its place. Giant production complexes cannot disappear and reappear elsewhere. This applies both to Lukoil and Rosneft themselves and to their contractors who process their oil abroad. The US Treasury Department has given a month to complete all transactions with sanctioned companies, issuing the relevant licences.

The sanctions will hit refining (which is already suffering from the fallout) and production very hard. In both cases, the technology and equipment required are one-off items, and there are only a handful of companies that supply them. Some of them remained in Russia even after the war began, but no one will work with those under US sanctions. Not even China. These are not parts for drones that cannot be tracked. This is a market where everyone knows everyone else, and the fate of equipment is tracked.

Let's be honest, even US sanctions will not stop Russian oil exports or the operations of Rosneft and Lukoil. The origin of the oil will be concealed, and the chain of intermediaries will become longer. As a result, companies will have to spend a significant portion of their revenues on circumventing restrictions. Profits will fall, and so will budget revenues. This is exactly what the US is aiming for.

It should be noted that this is the first significant action taken by the Trump administration in the area of sanctions since the start of his second term. Even under Biden, in the last year of his administration, sanctions were imposed not against first-tier players, but against those who helped companies already on the lists to circumvent sanctions.

However, Trump did not lift any sanctions, extending the restrictions imposed by the previous administration. At the same time, Trump, willingly or unwillingly, eased the pressure of sanctions in another way. Due to cuts in the government apparatus caused by this chaos and a shift in foreign policy priorities, the US became much less active in prosecuting violations of existing restrictions. And their sanctions began to be circumvented more actively. Even the pressure on India has recently been exerted not in the form of sanctions, but in the form of politics and Trump's favourite tariffs.

Everyone has become accustomed to ignoring Trump's latest disappointment and the fact that he has once again changed his position. But now, finally, patience has run out. The US Treasury Department has written about this in no uncertain terms.

I do not think this will fundamentally change Putin's position. Moreover, as previous experience of his relations with Trump shows, whatever symbolic steps Putin has taken towards the US have never led to a relaxation of sanctions. The US is increasing the reward for ending the war, but is not trading sanctions for trifles. For now.

The question is whether the US will return to a policy of actively prosecuting sanctions evasion and whether it will have the strength to do so in the context of the shutdown, staff cuts and endless vacillations from ‘we'll agree tomorrow’ to ‘disappointed again’.

—
Paweł Krawczyk https://krvtz.net/
Fediverse @kravietz@agora.echelon.pl