US takes aim at Russian oil and gas drilling with new round of sanctions

The US has imposed new sanctions on a raft of Russian oil services companies and senior officials in the energy ministry, as the Biden administration ratchets up its pressure on Moscow over the war in Ukraine.

The sanctions are aimed at reducing Russia's ability to expand its oil and gas production and exports, the US State Department said in a statement. Several Russian mining and technology companies and banks were also placed under sanctions, which effectively block the entities' access to the international dollar-based banking system.

"These sanctions will restrict Russia from accessing critical materials, inhibit its future energy production and export capabilities, curtail its use of the international financial system, and crack down on those complicit in sanctions evasion and circumvention," Secretary of State Anthony Blinken said.

Russia pumped 9.42 million b/d of crude in June, according to the latest Platts OPEC+ survey by S&P Global Commodity Insights. That is down from 10.11 million b/d in February 2022, when Russia launched its invasion of Ukraine, but far more resilient than many analysts had forecast at the start of the war.

Several rounds of sanctions imposed by the US and European powers have cut off Russia's access to Western markets and restricted the ability of traders and shippers to transact in Russian oil, but Moscow has found ready buyers of its discounted barrels in China and India.

The latest sanctions, however, seek to impair Russia's E&P capabilities.

Among the companies sanctioned are several Russian firms that provide engineering, technology, drilling and maritime services for upstream operations, such as Nipigaz and Siberian Service Co.

Sakhalin Shipping Co. and many of its vessels were also placed under sanctions, with the US State Department saying the company was involved in delivering construction material and equipment to drilling sites and in "expanding Russia's trade routes to new jurisdictions as the Russian Federation looks to backfill economic connections it has lost due to the invasion of Ukraine."

Officials sanctioned

Two senior officials in the Russian energy ministry were placed on the sanctions list: Pavel Sorokin and Pavel Snikkars, both deputy ministers.

Sorokin is heavily involved in Russia's OPEC+ affairs, assisting Russian Deputy Prime Minister Alexander Novak -- who was previously placed under US sanctions -- in meetings with OPEC+ counterparts.

Russia has allied with OPEC and several other key oil producers since 2017 on a series of output cuts to prop up prices. Most recently, Russia declared in March that it would cut its production by 500,000 b/d from February levels in retaliation for Western sanctions, doubling down in June with a commitment to reduce its crude exports by another 500,000 b/d in August.

An OPEC+ monitoring committee co-chaired by Saudi Arabia and Russia is due to meet online Aug. 4 to review market conditions. The full OPEC+ alliance is set to convene in person in Vienna on Nov. 26.

The sanctions on Novak have not prevented the minister from attending OPEC+ meetings in the Austrian capital to date.