WASHINGTON, Jan 10 (Reuters) - The Biden administration has implemented its most extensive set of sanctions yet, focusing on Russia's oil and gas revenues, aiming to provide Kyiv and former President Donald Trump's incoming administration with leverage to mediate a peace deal in Ukraine.
The objective of these actions is to diminish Russia's oil earnings fueling the conflict that commenced in February 2022 and has resulted in tens of thousands of casualties, extensive damage to cities, and numerous casualties.
A senior Biden official briefed reporters, stating that these measures represent "the most significant sanctions yet against the Russian energy sector, the largest source of revenue for the Kremlin's war machine."
The U.S. Treasury has levied sanctions on Russian companies Gazprom Neft and Surgutneftegas, along with 183 vessels engaged in shipping Russian oil, including those in a fleet of aging tankers operated by non-Western entities. These actions also encompass trading networks dealing with petroleum.
A considerable portion of these tankers has been transporting oil to India and China as the oil trade flow from Europe to Asia has intensified following the 2022 price restrictions imposed by the Group of Seven nations. Some vessels have transported both Russian and Iranian oil.
The rationale behind the sanctions is to impact every phase of Russia's oil production and distribution chain, potentially costing Russia billions every month if rigorously enforced, according to the official.
The sanctions target oil producers, vessels, intermediaries, traders, and ports, covering every aspect of the production and distribution process to hinder evasion and increase costs for Russia.
Although a grace period until March 12 has been granted for sanctioned entities to conclude ongoing energy-related transactions, sources in Russian oil trade and Indian refining anticipate significant disruptions in Russian oil exports to major purchasers like India and China.
Gazprom Neft denounced the sanctions as unfounded and illicit, asserting its intent to proceed with its operations.
Global oil prices surged by more than 3% before the Treasury's announcement, as Brent crude approached $80 a barrel, following the dissemination of a document outlining the sanctions to trading partners in Europe and Asia.
These sanctions form part of a broader strategy, as the Biden administration has furnished Ukraine with approximately $64 billion in military aid since the invasion, including recent provisions for air defense weaponry, air-to-ground munitions, and fighter jet support equipment.
The recent sanctions build upon previous U.S. sanctions imposed on Russian banks and other entities, contributing to the depreciation of the ruble and an elevated policy rate by the Russian central bank.
The Biden administration anticipates that the new penalties will exacerbate economic pressures on Russia, escalating inflation to nearly 10% and forecasting a bleak economic outlook for the coming years, aiming to strengthen leverage for future negotiations towards a just and enduring peace in Ukraine.