Kremlin Says Sanctions Will Cost Europe

The Kremlin says strengthened sanctions from the European Union and United States against Moscow will cost the West more than Russia.

The EU on Sept. 12 formally extended its ban on 15 companies' access to shares or bonds issued by European institutions that mature in more than 30 days. The companies include three energy giants - Gazprom Neft, Rosneft and Transneft - and three major manufacturers - Oboronprom, Uralvagonzavod and United Aircraft Corp.

The new sanctions also forbid EU companies from signing new contracts for oil drilling and exploration in partnership with Russian firms.  

And they prohibit European companies from providing related services to Russian energy ventures in the Arctic, offshore deposits, and shale formations.

Washington imposed similar penalties the same day in a coordinated effort to punish Russia for unilaterally annexing Ukraine's Crimean peninsula in March and for Moscow's suspected support of pro-Russian separatists fighting Kiev's forces in eastern Ukraine.

In announcing the measures, the U.S. Treasury Department said, "Today's step, which complements Commerce Department restrictions and is similar to new EU measures published today, will impede Russia's ability to develop so-called frontier or unconventional oil resources, areas in which Russian firms are heavily dependent on U.S. and western technology."

It added, "While these sanctions do not target or interfere with the current supply of energy from Russia or prevent Russian companies from selling oil and gas to any country, they make it difficult for Russia to develop long-term, technically challenging future projects."

Russian President Vladimir Putin called the latest round of Western sanctions "strange" and said he has been supporting peace efforts in Ukraine. On a visit to Dushanbe, Tajikistan, he said the continued ramping up of sanctions makes the situation worse.

The Russian Foreign Ministry, meanwhile, said it would retaliate for what it called yet another "hostile step." Putin spokesman Dmitry Peskov said Sept. 11 that European taxpayers and companies "will have to pick up the costs" for the expanded EU penalties.

In August, Russia responded to a previous strengthening of U.S. and EU sanctions by barring the import of various foods from the West. In response to the latest sanctions, Kremlin economic adviser Andrei Belousov told RIA Novosti that the Economy Ministry may ban the import of many Western products and was considering restricting Western airlines' flights in Russia's Asia-Pacific air space.

But European Parliament President Martin Schulz, speaking the following day at a conference in Kiev, said Moscow should recognize the strengthening of the sanctions as a message that there is "no return to business as usual."

By Andy Tully of Oilprice.com