Washington’s newest round of sanctions against Moscow’s oil and gas industry targets Russia’s upcoming projects worldwide, according to drafts of the measures introduced at the United Nations by the U.S.
The punitive measures – designed to be a political reaction to Russia’s annexation of Crimea in 2014 – will have a limited effect on Moscow’s current operations abroad, experts said.
A new provision in a preexisting sanction levied by the U.S. Department of Treasury now prohibits companies from assisting in exploration and production activities in deep waters, the Arctic Ocean, or shale projects initiated after January 29th, 2018. Projects that boast Russian holdings of 33 percent or higher are singled out in the fine print.
“Projects currently being implemented do not fall under the sanctions. This includes Lukoil’s projects in Romania and Ghana offshore as well as Rosneft’s projects in Venezuela,” Fitch Ratings analyst Dmitry Marinchenko told Reuters.
American sanctions on Russia oil and gas companies have had little effect on Moscow’s leverage in securing lucrative exploration and production deals so far. Current production stands at 10.92 million bpd, which is close to a 30-year record.
“The (33 percent) threshold leaves the possibility for sanctioned Russian companies to take part, even in new projects,” Marinchenko said.
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There are signs that the sanctions are showing limited effectiveness. The measures made the offshore Yuzhno-Chernomorsky oil field economically unfeasible, and Rosneft will now suspend exploration in the area for five years, the company said earlier this week.
The EU’s sanctions contain a grandfather clause allowing existing partnerships to continue, but this is not the case with the U.S. sanctions, so Exxon has had to pull out of its joint projects with Rosneft. Earlier this year, the supermajor asked Washington for a sanction waiver in a bid to continue its work in Russia, with a special focus on Arctic drilling, but the request was denied.
By Zainab Calcuttawala for Oilprice.com
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