US, Europe Look At Tougher Sanctions As Russian Oil Production Booms
The Obama administration is looking to slap Russia for ongoing aggression in Ukraine. But possible new sanctions come amid reports of rising Russian oil production in the face of sanctions already placed on the country’s major energy producers.
Reuters reports that U.S. officials are “considering limiting hi-tech exports to Russia’s Arctic oil and gas industry” as part of a new round of targeted sanctions. The move comes after reports that Russian troops have crossed into Ukraine to aid the rebel forces in the eastern half of the country.
“We are looking at further tightening of restrictions on energy exports and the licensing of hi-tech exports, not only to the energy sector but specifically to Arctic oil and gas,” Anthony Gardner, the U.S. ambassador to the European Union, told Reuters.
Russia supplies one-third of Europe’s gas and is also a major oil supplier to the region. The crisis in Ukraine has stoked worries that President Vladimir Putin could cut off natural gas and oil supplies to Europe if they try and stymie his Ukrainian ambitions.
Europe initially moved cautiously on reprimanding Russia for its actions in Ukraine, fearing sanctions would increase their own energy bills. But now Europeans are expected to impose new sanctions on Russia this Friday as Putin’s troops move into Ukraine.
For the U.S. and its allies, more sanctions may be needed to punish Russia’s energy producers as the country’s oil industry has not yet felt the bite of targeted sanctions. Russian Energy Ministry data shows oil production rose 1 percent from August to July, reaching 10.52 million barrels per day.
The rise primarily came from state-owned gas company Gazprom’s activities with foreign firms, reports Reuters. Gazprom saw its own production activities rise 36 percent from July to August. (RELATED: Former US Senators Hired To Lobby For Gazprom’s Bank)
Russia’s Energy Ministry forecasts “oil production to reach 525 [million] tonnes this year (10.54mn bpd), up 0.4 percent year-on-year,” reports Reuters.
Russian oil and gas condensate production was the world’s highest in August — only Saudi Arabia came close, averaging 9.75 million barrels per day last month.
But as time goes on, Russian energy firms may begin to feel the bite from sanctions as Western funding is closed off to them. Some companies have already planned to cut investments due to sanctions.
“Struggles in accessing foreign funding may affect investments in oil production,” Valery Nesterov, an analyst with Sberbank CIB, told Reuters.
And as Western funds dry up, Russia is increasingly looking to Asia for new investment opportunities. Over the weekend, Russia began construction on a 2,500 mile natural gas pipeline to China that could eventually carry up to $400 billion worth of fuel.
Reuters notes that Russia’s largest oil company, Rosneft, has “offered Chinese investors a stake in its huge Vankor oil project, its second biggest, which pumped an average 442,000 bpd in August.”
State-owned Rosneft has been targeted by U.S. sanctions.
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