What Is The Main Strength Of U.S. Sanctions Against Russia?

"Rosneft and Lukoil were not just denied access to dollars.

This week, Donald Trump announced sanctions against two major Russian oil companies, Rosneft and Lukoil. As Sky News writes, if fully implemented, they have the potential to significantly cut off the flow of fossil fuel revenues that finance Russia's war machine.

"Their power, however, lies not in directly denying Russia access to the tankers, ports and refineries that keep the oil trade running, but in the U.S. financial system that greases its wheels," columnist Paul Kelso points out.

He explains that although Russian oil has not been shipped to the US, the sanctions will directly affect the ability of Russian companies and anyone doing business with them to operate in America's financial orbit.

"In practice, the measures should deny both companies access not only to the dollar, but also to trade markets, insurance and other services with any financial connection to the US," Kelso writes.

Russian oil consumers in China, India and Turkey will also suffer, as major companies, both state-owned and private, are expected to be unwilling to take the risk of dealing directly with sub-sanctioned companies.

This does not mean that Russian oil and gas exports will stop. There are other Russian energy companies not under sanctions that can still trade, and that industry has demonstrated skillful evasion of sanctions aimed at interrupting its supply from one country or another.

Any significant increase in oil prices above 5% seen since the announcement could also put pressure on the White House, which is as sensitive to fuel prices at home as it is to wars abroad.

But Kpler analysts expect the sanctions to result in "an immediate, short-term disruption to Russian oil exports, as sellers will need time to reorganize and restructure their trading systems to circumvent the restrictions and reassure buyers."

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