US seeks tougher sanctions on Russian oil

The Biden administration is considering tougher new sanctions on Russia’s lucrative oil trade, seeking to tighten pressure on the Russian president’s war machine just weeks before Donald Trump returns to the U.S. presidency, Rigzone reported.

Details of the potential new sanctions are still being worked out, but U.S. President Joe Biden’s team has been considering restrictions that could target some Russian oil exports, according to sources.

These moves have long been resisted by U.S. President Joe Biden over concerns they could lead to a spike in energy costs, especially in the run-up to last month’s U.S. presidential election.

But with oil prices falling amid a global glut and growing concerns that Donald Trump may seek to force Ukraine into a quick deal with Russia to end its nearly three-year war, the Biden administration is now open to taking tougher action, the sources said.

The discussions highlight how much risk Joe Biden’s team is willing to take in confronting Russia, especially with previous efforts to choke off the Russian government’s energy revenues having mixed results and average U.S. gasoline prices at their lowest since mid-2021.

In recent weeks, the Biden administration has moved to increase military and financial support for Ukraine amid questions about Donald Trump’s commitment to continued U.S. support.

The United States already bans imports of Russian oil, but new restrictions on exports from one of the world’s largest producers — which could involve identifying buyers for its crude — would upend more than two years of policy set after Russia launched its full-scale invasion of Ukraine in February 2022.

The Biden administration has also been considering new sanctions targeting the tanker fleet Russia uses to transport its oil, the sources said. New restrictions on the so-called “hidden fleet” could be unveiled in the coming weeks.

The European Union plans to take similar measures on Russia’s hidden fleet before the end of the year, and is also expected to target individuals involved in the trade.

One model for broader U.S. sanctions on Russia could be to impose restrictions similar to those on Iranian oil, in which case buyers of Iranian oil would face U.S. sanctions. Such a move would be risky, given that powerful countries including India and China are major consumers of Russian crude.

More importantly, such restrictions could send oil prices soaring, putting global economic pressure on the market.

Crude futures have been in a tight range since mid-October 2024, with international benchmark Brent crude trading below $75 a barrel, compared with more than $120 in the months following Russia’s invasion.

It would also stoke tensions with adversaries and partners alike, whom the United States wants to help curb exports of sensitive goods like chips and other technologies that fuel Russia’s war machine.

While the moves would seek to capitalize on a softer oil market, they are also aimed at increasing pressure on Russia before Donald Trump takes office.

President-elect Donald Trump has pushed for negotiations to end the war in Ukraine, and current officials say they want to give Ukrainian President Volodymyr Zelensky’s government as much leverage as possible ahead of any talks.

With that in mind, further squeezing key imports like oil for Russian President Vladimir Putin could strengthen Ukraine’s negotiating position, and there is a chance that Donald Trump could reverse the measures if he feels they have inflated oil prices, but that risks the potential political cost of appearing weak or making concessions to Russia too soon.

So far, US President Joe Biden has been easing restrictions on Russian oil in an effort to limit the price of its crude, balancing the need to avoid disrupting global markets and limiting the revenue Russia earns from buyers.

However, while the value of seaborne oil flows fell after the G7 imposed a price cap in early December 2022, they have since recovered.

The latest move follows US restrictions last month on Gazprombank, the last major Russian financial institution exempted from sanctions.

The Biden administration had previously decided not to impose sanctions on the Russian bank, which European countries use to pay for gas they still buy from Russia, for fear of causing disruptions in global commodity markets. Hungary, along with other countries that rely on Russian gas imports, has already warned that the US decision poses a potential threat to energy security, and Turkey has also sought an exemption from the sanctions.