In response to the war in Ukraine, an increasing number of countries and companies have made commitments to stop or curtail their reliance on Russian energy, mainly in the form of oil, natural gas, and coal imports.
While some have fully sanctioned Russian energy resources, others have dithered over the decision, whether because of difficulty in replacing the Russian capacity, or for other political and economic reasons. In this article I will lay out what sanctions have been put in place and by whom, in order to provide a broad and quickly comprehensible overview of the situation as it currently stands.
The United States banned all imports of Russian oil, LNG, and Coal through an executive order on March 8th, an action that should be taken through a congressional route instead. Most U.S. oil majors had already ceased importation of Russian energy at this point, and several had taken the pivotal step of divesting themselves from the Russian energy industry.
In early March, Exxon Mobil announced that it would stop its more than $4 billion in oil and gas operations in Russia. In very early March, Shell bought a cargo of 100,000 metric tons of Urals crude at a steep discount (largely due to the refusal of other majors to buy the cargo), in order to maintain supply to its European markets. Although this move came before official U.S. sanctions, Shell still received broad push back for purchasing the cargo. The company issued a statement justifying the purchase, and Ukrainian Foreign Minister Dmytro Kuleba responded to CNBC that, “The world will judge them accordingly. And history will judge them accordingly”. Since official U.S. sanctions have been in place, domestic companies have ceased to be a problem in this regard.
Additionally, in late February, British Petroleum (BP) CEO Bob Dudley stepped down from the board of Russian oil giant Rosneft, and BP announced that it would be divesting of its 19.75% stake in Rosneft. The cost of this action could be up to $25 billion.
Australia and Canada have also already ceased the importation of Russian energy products. In Europe, the situation is more complicated thanks to constraints in the domestic supply. The European Union Commission recently stopped Russian coal imports, and is currently working on a proposal to sanction Russian oil, but the EU is struggling to find a replacement for that oil elsewhere. In the lead up to this decision, the EU has been in talks with the Organization of Petroleum Exporting Countries (OPEC) over replacement capacity. As it currently stands, OPEC says it will be unable to replace the capacity lost by current and projected sanctions, with OPEC Secretary General Mohammad Barkindo stating that, “Considering the current demand outlook, it would be nearly impossible to replace a loss in volume of this magnitude.” The EU Commission’s decision will be forthcoming soon, and will reveal Europe’s next steps on sanctions.
Japan is one of the latest countries to announce sanctions. Last week, Japanese Prime Minister, Fumio Kishida, announced that Japan would phase out its use of Russian coal in response to the war in Ukraine. A firm time table is yet to be established, but the Prime Minister has said that the move will take place as soon as replacement capacity can be found for Japanese industry.
In the coming weeks it will be important to follow how the situation in Europe develops, especially whether or not they are able to secure the replacement capacity necessary to effectively sanction Russia. Japan appears likely to act on its promise to sanction Russian coal, and the mounting energy sanctions when coupled with the increasing sanctions on other Russian products including its financial sector are likely to put increasing pressure on Russian President Vladimir Putin as the war continues.
This piece was produced by Paige Lambermont, a Policy Associate at IER