US plans 'steady drumbeat' of sanctions crackdown to hit Russian oil revenues: official

The US plans to continue sanctioning more oil tankers to ramp up enforcement of the G7's so-called 'price cap' on Russian oil exports which has been successful in denting Moscow's oil revenues, the US assistant secretary of state for energy, Geoffrey Pyatt said April 8.

US Treasury in October launched a crackdown on breaches of its sanctions on shipping Russian crude over $60/b and has since named a number of tanker owners suspected of dodging the mechanism designed to hit the value of Russia's key export commodity. In January, the US Treasury's Office of Foreign Assets Control (OFAC) imposed sanctions against 19 tankers that transported Russian oil under the flags of Liberia and Panama.

"We're trying to drive down Russia's oil and gas revenue as fast as we can, without destabilizing our global energy market," Pryatt told the FT Commodities Global Summit. "You should expect the continued steady drumbeat of US and coalition enforcement actions."

First launched in December 2022, the price cap on Russian crude exports has been criticized as being widely dodged due to a growing fleet of "gray market" oil tankers owned by Russia or operating without Western marine shipping insurance. Although Russia's key Urals crude grade has been trading well above $60/b since December last year, according to Platts, a unit of S&P Global Commodity Insights. Pyatt said he believes the price cap is hitting Russian revenues. Urals FOB Primorsk was assessed by Platts at $75.94/b on April 5, a $17.3/b discount to Dated Brent.

Moscow's oil tax revenue is currently down nearly 30% from where it was 2022, and the overall reduction in Russia's oil export revenue is $2.6 billion compared with November 2022, he said.

"We're going to stick to this course of action and we're gonna stick to it as long as is necessary in order to change Russia's behavior and this brutal and unprovoked war," he said "What you've seen emerging is the bifurcation of global energy markets. You've got one market which is deep and transparent and well-integrated with the global economy and you have another market which is shallow, opaque and unreliable. Our objective in that second market is to raise the costs to the Kremlin as high as possible in order to drive down the revenues that Russia enjoys."

Pyatt also pointed to recent reports that Russia's Novatek has suspended production at its Arctic LNG 2 project due to sanctions and a shortage of gas tankers.

"What I can tell you is we're very focused on ensuring that Russia is not able to develop new projects," he said.