On January 10, 2025, the Biden Administration issued a broad sanctions package targeting the Russian energy sector, 10 days in advance of the transition to the incoming Trump Administration. The new sanctions also added two of Russia’s largest oil companies—Gazprom Neft and Surgutneftegas—to the Specially Designated Nationals and Blocked Persons List (SDN List), along with relisting Russia’s largest shipping company, Sovcomflot, and sanctioning 183 shadow fleet vessels, and dozens of associated oil traders, oilfield service providers, insurance companies, and energy officials. The sanctions mark a significant increase in sanctions pressure against Russia in a coordinated effort with the UK.
Secondary Sanctions Targeting Russia’s Energy Sector and Banning “Petroleum Services”
The new OFAC directive, issued pursuant to Executive Order 14024, authorizes the imposition of sanctions on any person operating in the energy sector of the Russian Federation economy. These prohibitions carry secondary sanctions risks because they apply not just to US persons but to any persons who operate in the Russian energy sector. OFAC has not yet published its definition of energy sector of the Russian Federation economy under the new directive, but it has issued some preliminary guidance stating that it anticipates defining the term energy sector broadly to encompass a wide range of upstream, midstream and downstream activities and a range of energy products including oil, natural gas, and petroleum products.
Additionally, OFAC issued a second directive, pursuant to Executive Order 14071, which bans US persons and entities from conducting transactions in petroleum services with persons located in the Russian Federation. Importantly, the “petroleum services” ban preserves the price cap exception, currently: US$60/barrel for crude oil; US$45/barrel for Discount to Crude petroleum products; and US$ 100 per barrel for Premium to Crude petroleum products. Additionally, the ban does not revoke any existing licenses that entities may have involving transactions in petroleum services with Russian entities. OFAC has not yet published a definition of petroleum services but it has stated that it anticipates defining petroleum services broadly to include services related to crude oil, petroleum products and natural gas as a byproduct of oil production.
Sanctions on Russian Producers and Vessels
Under the new sanctions, the Treasury Department has added two Russian oil majors—Gazprom Neft and Surgutneftegas—to the SDN list and redesignated Sovcomflot, plus 183 shadow fleet vessels and dozens of associated oil traders, oilfield service providers, insurance companies, and officials.
Gazprom Neft and Surgutneftegas are the second and fourth largest crude oil production companies in Russia as of 2023 according to the US Energy Information Administration. In addition to the sanctioned parent companies, OFAC identifies 20 Gazprom Neft subsidiaries, 7 Surgutneftegas subsidiaries, and Joint Stock Company Surgutneftegasbank (SNGB), a Russia-based commercial bank. The sanctions block all dealings in or with property or interests in property of sanctioned persons, including dealings with any of their vessels.
Sovcomflot, which was previously listed as an SDN, is Russia’s largest shipping company. In addition to its relisting, the new sanctions package revokes previous authorizations to transact with vessels owned by Sovcomflot, effectively sanctioning all Sovcomflot vessels (General License 93 revoked).
Other targets of the sanctions package include two Russia-based maritime insurance providers—Ingosstrakh Insurance Company and Alfastrakhovanie Group; 30 Russia-based oilfield providers; 37 individuals; over 200 additional companies operating in the Russian energy sector; and 183 shadow fleet vessels.
General License 8L will stop USD payments for energy-related transactions via sanctioned banks.
General License 8L will now wind-down on March 12, 2025. As a result, entities operating in the Russian oil and gas sector now will be unable to use sanctioned Russian banks to pay for Russian oil and gas or other energy-related transactions in connection with matters transiting the US.
This change marks a major shift in US sanctions policy, which had previously sought to preserve flows of Russian oil and other energy commodities to third countries in a bid to avoid a steep increase in global energy prices. Before the issuance of GL 8L, OFAC regularly reissued the GL 8 every six months. The winding down of GL 8 substantially reduces the number of financial channels available for processing payments related to supplies of oil, gas and other energy commodities from Russia. These restrictions build on the Moscow Exchange (MOEX) and Gazprombank designations in August and November of 2024. Together, these sanctions make it much more difficult both to ship and pay for Russian energy commodities and perform currency conversions.
Additional new General Licenses further require or accelerate wind-down transactions in the Russian energy sector.
- General License 117 authorizes wind-down of transactions with the sanctioned entities listed in the Annex of the license (Russian oil and gas related companies, including Surgutneftegas). All winddown transactions must be completed by February 27, 2025.
- General License 118 authorizes all transactions ordinarily incident to and necessary for the divestment or transfer of debt or equity issued or guaranteed by Gazprom Neft, Surgutneftegas, Ingosstrakh Insurance Company, and entities 50% or more controlled by those entities. Until February 27, 2025.
- General License 120 authorizes transactions related to the safe docking, and anchoring of sanctioned vessels and the unloading of cargos on sanctioned vessels listed in the Annex until February 27, 2025, provided that those vessels were loaded before January 10, 2025.
- General License 121 authorizes transactions related to the Caspian Pipeline Consortium, Tengizchevroil, or Sakhalin-2 until June 28, 2025.
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