2 years ago
Ukrainian officials are pushing the Biden administration and lawmakers on the Hill to impose sanctions on Russian oil and gas exports and cracking down further on the energy supplies that international markets are already starting to shun.
Andriy Kobolyev, the former head of the country’s state-owned natural gas company, Naftogaz, said he has been meeting with U.S. senators and Biden administration officials to push for sanctions on Russian fossil fuel exports, which he asserts will be necessary to convince Russian President Vladimir Putin and those around him to halt their invasion of Ukraine. Kobolyev said he has been holding these meetings with the blessing of Ukraine President Volodymyr Zelenskyy.
“We are pushing for a full embargo on oil and gas from Russia to the West,” Kobolyev said in an interview.
“In my experience dealing with [Putin’s] team and him personally, one of the cornerstones ... is that the energy supply is so important to the West — the collective West — that no matter what [Russians] do, they'll always be forgiven, that Western countries will crawl back on their knees asking for their oil and gas," he said. "If the West makes the first move and says 'look, we are putting sanctions' or 'we are saying no to your gas and oil,' that will undermine that important hypothesis that Putin personally is using to convince people around him to do completely crazy things.”
A staffer for Sen. Kevin Cramer (R-N.D.) confirmed he'd met with Kobolyev but did not comment further. Sen. Pat Toomey (R-Pa.) confirmed he had met with a Ukrainian energy official. Toomey on Twitter Monday called on Biden to impose new broader sanctions on Russia's financial sector.
Kobolyev's meetings with lawmakers come after Ukraine Foreign Minister Dmytro Kuleba on Tuesday criticized oil companies that had not yet completely severed ties with Russia, and he has called for an embargo on Russian energy exports. In a document seen by POLITICO that Ukrainian officials circulated to supporters, Kuleba also requested the "blocking of all assets in U.S. jurisdiction and prohibiting U.S. individuals and legal entities from carrying out any transactions with foreign legal entities and individuals involved directly or indirectly, involved in or assisting in the purchase of Russian metallurgy products and energy products."
The idea of blocking imports of Russian oil into the United States is gaining support on Capitol Hill. Sen. Ed Markey (D-Mass.) on Tuesday unveiled a bill that would ban the import of Russian crude oil into the United States and sanction companies and people involved in bringing it into the country.
“American fossil fuel companies helped fuel Putin’s despicable war on Ukraine to the tune of billions, propping up the oil-garchs and cronies that keep him in power,” Markey said in a press release. “There is no separating Russian oil from the corruption and human rights abuses of the Putin regime."
Much of Russia’s oil and gas flows to Europe, and deliveries of natural to countries there have actually grown since hostilities started. The United States does not import Russian gas but does take about 540,000 barrels a day of Russian crude oil and other petroleum products — a relatively small amount the total U.S. energy imports.
The Biden administration has so far rejected the idea of banning imports of Russian oil into the United States, saying Russia could simply sell the oil elsewhere. It also argues that sanctions on Russian oil and gas would prove too painful for Germany and other European allies that have so far gone along with imposing sanctions on Russia’s central bank and other financial entities, as well as kicking it off the international banking messaging system, SWIFT. Those moves have had a dramatic impact on the Russian economy this week.
“We are imposing devastating impacts on the Russian economy because Europe is united and willing to stick with it for the long term,” an administration official said. “If you cut off gas to Europe, they cannot hold on for the long term.”
But even without directly targeting Russia's oil exports, the sanctions that have rattled its financial foundations have caused global oil prices to spike. International benchmark Brent crude peaked above $107 a barrel on Tuesday as traders avoided cargoes and sought out crude elsewhere.
Pressure in the Capitol to target Russian oil and gas is especially notable among senators who represent energy states and argue U.S. producers could replace any shortfalls without having to turn to the Middle East or other producers for supply.
“To me, it makes no sense at all for us to rely on energy from a country that is actively engaging in acts of war against a freedom-seeking democracy in Ukraine when we are blessed with abundant energy resources right here in America," Senate Energy and Natural Resources Committee Chair Joe Manchin (D-W.Va.) said at a hearing on Tuesday. “It's time for the administration to take strong action to unleash American energy, up to an including banning Russian oil imports at a time when they're attacking our allies.”
The current sanctions on Russia’s banks have also created an almost de facto ban on the country’s energy exports, analysts said. Trading companies — and even Russia’s ally China — are increasingly wary of taking delivery of any Russian crude oil for fear of getting enmeshed in financial penalties, market analysts said.
British oil company BP canceled its loadings of Russian crude in the Black Sea, and Neste in Finland and Preem in Sweden are replacing and halting imports of Russian oil, said Andy Lipow, head of oil market analyst firm Lipow Oil Associates. For the second time in four days, the Russian oil producer Surgutneftegaz could not find buyers for its oil, he added.
“The oil business requires a lot of credit” from banks, Lipow said. “The amount of money that a bank makes from providing funding is small compared to the risk of being sanctioned and losing access to the world banking system.”
Private oil companies are also leaving Russia as financial sanctions and reputational risks pile up. Europe-based oil companies Shell and BP and wind company Equinor have said they will exit their operations in Russia, while French energy giant TotalEnergies, which is heavily invested in Russia, said it will not approve any new projects there.
Exxon Mobil is telling its non-essential personnel to leave the Sakhalin LNG project it shares with Russian company Rosneft, according to a company source. Exxon itself, which also owns stakes in other Russian energy projects, has not publicly responded to questions whether it will follow the European companies’ footsteps.
Given the growing moves in the private market against Russian energy supplies, Ukraine believes it is time for the Biden administration and European governments to official join in, Kobolyev said.
“An argument that I heard from people here is that everybody expected us to go down very soon” after Russia sent tanks into Ukraine and started shelling its cities, Kobolyev said. “We were compared to Afghanistan, that 'the next day after the Russians start full-scale operations, you will go down. You will put your weapons down and give in.' Well, that's not happening, which means we are worth fighting for.”
Josh Siegel and Kelsey Tamborrino contributed to this report.
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