Stringent new energy sector sanctions on Russia announced

Companies in major Russian trading partners China and India also included in new sanctions listings
SAKHALIN ENERGY
Lunskoye-A is Russia's first ice-class offshore gas production platform

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On January 10, the U.S. Government released a massive new listing of over 200 entities and individuals involved in Russia’s energy sector for Ukraine-related sanctions and identified over 180 vessels as blocked property. With another 10 days before the Biden administration departs, we doubt these are the final new sanctions to be announced, judging from the frenetic sanctions-related activity seen in the previous weeks at the State and Treasury Departments.

On January 15, the International Energy Agency (IEA) released estimates for the 2025 supply outlook, noting the new sanctions “could result in a tightening of crude and supply balances,” but curiously held off on factoring the new sanctions into its latest supply forecasts.  The IEA was badly mistaken back in 2022 when it massively overestimated the impact of western sanctions on Russian supply at the start of the Ukraine war, resulting in excessive caution in more recent estimates.

The U.S. Department of State’s brief press statement of January 10 covers all the key points regarding the new measures:

Sweeping Sanctions on Russia’s Energy Sector

“The United States is imposing sanctions today on more than 200 entities and individuals involved in Russia’s energy sector and identifying more than 180 vessels as blocked property. This wide-ranging, robust action will further constrain revenues from Russia’s energy resources and degrades Putin’s ability to fund his illegal war against Ukraine.

Of these targets, the Department of State is sanctioning nearly 80 entities and individuals, including those engaged in the active production and export of liquefied natural gas (LNG) from Russia. Others include those attempting to expand Russia’s oil production capacity; those providing support to the U.S.-sanctioned Arctic LNG 2 project; those involved in Russia’s metals and mining sector; and senior officials of State Atomic Energy Corporation Rosatom.

The Department of the Treasury is concurrently sanctioning more than 150 entities and individuals, including major Russian oil producers Gazprom Neft and Surgutneftegas, Russian insurance companies, and shadow fleet vessels. Treasury is also identifying the energy sector of the Russian Federation, which restricts further Putin’s ability to generate revenue and fund Russia’s malign conduct. Treasury also issued a new determination prohibiting the provision of certain services to persons in the Russian Federation, thereby cutting off Russia’s access to U.S. services related to the extraction and production of crude oil and other petroleum products.

The United Kingdom joins us today in targeting the Russian energy sector as we continue to use all available tools together with G7 and other likeminded partners to curb Russia’s ability to fund its illegal war against Ukraine. We stand in solidarity with Ukrainians in defending their homeland from Russia’s aggression.”

The Department of State also released a detailed fact sheet entitled “Sanctions to Degrade Russia’s Energy Sector” covering State Department actions which we have summarized below. Additional targeted steps by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) are described in the press release here.

The Department of State’s designations aim to reduce Russia’s oil and natural gas revenue through sanctions on operators of significant Russian crude oil production and liquified natural gas projects. State is designating the chief executive officer and members of State Atomic Energy Corporation Rosatom’s (Rosatom). All Department of State targets are being designated pursuant to Executive Order (E.O.) 14024, as amended, which authorizes sanctions with respect to specified harmful foreign activities of the Government of the Russian Federation.

–The State Department is designating senior officials of Rosatom, including Chief Executive Officer Alexey Likhachev and members of Rosatom’s Management Board. This is the eleventh Russia sanctions action that includes Rosatom-related designations. The latest actions bring the total number of Rosatom-related designations by the United States to nearly 70 subsidiaries and related individuals. They also serve to align U.S. actions with past designations of Rosatom board members by the United Kingdom (UK) and Canada. These designations are consistent with G7 commitments to reduce Russian nuclear energy supplies and services.

–The State Department is designating entities engaged in the active production and export of liquified natural gas (LNG) from Russia; the provision of material support to Limited Liability Company ARCTIC LNG 2 (LLC ARCTIC LNG 2); the circumvention of U.S. sanctions on U.S.-designated Joint Stock Company SOVCOMFLOT (SOVCOMFLOT); and attempts to expand Russia’s oil production capacity. These designations aim to significantly limit Russia’s ability to generate revenue from its energy resources.

–The State Department is designating two currently producing Russian LNG export terminals to directly disrupt Russia’s ability to produce and export LNG and reduce Russia’s revenue from LNG exports. Pursuant to section 1(a)(i) of E.O. 14024, the following entities are being designated for operating or having operated in the energy sector of the Russian Federation economy:

GAZPROM SPG PORTOVAYA LLC is the Russia-based operator of the Portovaya LNG terminal.

CRYOGAS VYSOTSK LLC is the Russia-based operator of the Cryogas Vysotsk LNG terminal.

–The Department is designating the operator of the Vostok Oil project, VOSTOK OIL LLC (VOSTOK OIL), and one of its subsidiaries. The Vostok Oil project is a major Russian oil development project from which Russia hopes to export upwards of two million barrels of oil per day. Today’s actions are intended to slow down or halt further construction of the Vostok Oil project and limit the project’s ability to market and export crude oil and petroleum products in the future. VOSTOK OIL LLC is being designated pursuant to section 1(a)(i) of E.O. 14024 for operating or having operated in the construction sector of the Russian Federation economy. TAGULSKOE LLC (TAGULSKOE) is a Russia-based subsidiary of VOSTOK OIL that is primarily engaged in oil production and extraction. TAGULSKOE is being designated pursuant to section 1(a)(i) of E.O. 14024 for operating or having operated in the energy sector of the Russian Federation economy.

–The State Department continues to designate entities providing material support to U.S.-designated SOVCOMFLOT so as to reduce Russia’s ability to export oil. The Department is now designating a PRC-based crude oil terminal operator, together with a PRC-based subsidiary, and a Kazakhstan-based ship management company for their support to the crude oil tanker NS BURGAS (IMO 9411020), a U.S.-blocked SOVCOMFLOT vessel:

—- SHANDONG UNITED ENERGY PIPELINE TRANSPORTATION Co Ltd. (SHANDONG UNITED ENERGY) is a PRC-based oil terminal operator that facilitated port calls and discharges in September and December 2024 of a U.S.-blocked Russian crude oil tanker, NS BURGAS IMO 9411020, a vessel in which U.S.-designated SOVCOMFLOT has an interest.

—-  GUANGRAO LIANHE ENERGY PIPELINE CONVEYOR Co Ltd. (GUANGRAO LIANHE ENERGY) is a PRC-based subsidiary of SHANDONG UNITED ENERGY that provides storage services.

—- UMBRA NAVI SHIPMANAGEMENT Corp. (UMBRA) is a Kazakhstan-based ship management company that is the manager and operator of OXIS (IMO 9224805), a crude oil tanker that conducted a ship-to-ship transfer of Russian-origin Urals crude oil with U.S.-blocked crude oil tanker NS BURGAS, a vessel in which U.S.-designated SOVCOMFLOT has an interest.

–To maintain pressure on Russia’s U.S.-sanctioned Arctic LNG 2 project, the Department of State is designating several PRC-based entities including a fabrication yard and a vessel operator involved in the construction and transportation of power generation modules for the Arctic LNG 2 project. The Department is also designating new ship management entities Russia is using to obfuscate the ownership of LNG carriers involved in Russia’s attempts to export cargo from the project.

—- ZHOUSHAN WISON OFFSHORE AND MARINE Co Ltd. (ZHOUSHAN WISON) has built and supplied power generation modules for LLC ARCTIC LNG 2.

—- HONGKONG YAQING SHIPPING Co Ltd. (HONGKONG YAQING) is the operator of OCEAN 28 (IMO 1021570), a vessel that transported power generation modules originating from ZHOUSHAN WISON to the Arctic LNG 2 project.

—- AVISION SHIPPING SERVICES Plc. (AVISION) is an India-based entity that became the operator of U.S.-designated LNG carrier NEW ENERGY (IMO 9324277) shortly before it loaded LNG from U.S.-designated LLC ARCTIC LNG 2.

—- SKYHART MANAGEMENT SERVICES Plc. (SKYHART) is an India-based entity that became the operator of U.S.-designated LNG carrier MULAN (IMO 9864837) shortly before it loaded LNG from U.S.-designated LLC ARCTIC LNG 2.

–The State Department is also designating eight subsidiaries of U.S.-designated NOVATEK CHINA HOLDINGS Co Ltd, itself a PRC-based company established in August 2023 involved in the implementation of a marketing program for LNG from the Arctic LNG 2 project.

–The State Department is also designating multiple Russia-based entities providing oil and gas field services specializing in oil exploration, drilling and engineering work, and technological and hardware modernization.

—- NEFTSERVICEHOLDING LLC  (NSKH  LLC) and its seven subsidiaries are part of a network of Russia’s oil and gas service providers engaged in modernizing and advancing the capabilities of Russian oil and gas projects. NSKH LLC is a Russia-based entity that operates a large network of oil field service providers and engineering firms in the Perm region of Russia.

–The State Department is also designating a range of other Russian oilfield service providers and energy-related entities, including engineering and technology companies, as well as financial and construction firms.

–The State Department continues to designate entities involved in Russia’s metals and mining industry to further constrain Russia’s revenue generation capacity. Most of these are Russia based but one is located in Cyprus. In addition, the Department is now designating entities within the network of two of the largest coal producers in Russia. Additionally, the Department is targeting Russia’s military-industrial base by designating critical importers of raw materials, including chromium, a key component in the production of artillery used in Russia’s full-scale invasion of Ukraine.

The usual sanctions restrictions apply in the case of newly designated entities. All property and interests in property of the sanctioned persons described above that are in the United States or in possession or control of U.S. persons are blocked and must be reported to the Department of Treasury’s Office of Foreign Assets Control. Additionally, all individuals or entities that have ownership, either directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.

 

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