(Reuters) - U.S. President Joe Biden's administration imposed its broadest package of sanctions so far targeting Russia's oil and gas revenues on Friday, in an effort to give Kyiv and Donald Trump's incoming team leverage to reach a deal for peace in Ukraine.
The move is meant to cut Russia's revenues for continuing the war that has killed or wounded tens of thousands and reduced cities to rubble since Moscow invaded Ukraine in February, 2022.
Ukrainian President Volodymyr Zelenskiy said in a post on X that the measures announced on Friday will "deliver a significant blow" to Moscow. "The less revenue Russia earns from oil ... the sooner peace will be restored," Zelenskiy added.
Daleep Singh, a top White House economic and national security adviser, said in a statement that the measures were the "most significant sanctions yet on Russia’s energy sector, by far the largest source of revenue for (President Vladimir) Putin’s war".
The U.S. Treasury said it had imposed sanctions on Gazprom Neft and Surgutneftegas, which explore for, produce and sell oil as well as 183 vessels that have shipped Russian oil, many of which are in the so-called shadow fleet of aging tankers operated by non-Western companies. The sanctions also include networks that trade the petroleum.
Many of those tankers have been used to ship oil to India and China as a price cap imposed by the Group of Seven countries in 2022 has shifted much of the trade in Russian oil from Europe to Asia. Some tankers have shipped both Russian and Iranian oil.
The Treasury also rescinded a provision that had exempted the intermediation of energy payments from sanctions on Russian banks.
The logic of the sanctions "is to hit every stage of the Russian oil production and distribution chain," the official said. They should cost Russia billions of dollars per month if sufficiently enforced, another U.S. official told reporters in a call.
The sanctions target oil producers, tankers, intermediaries, traders, and ports.
"There is not a step in the production and distribution chain that's untouched and that gives us greater confidence that evasion is going to be even more costly for Russia," the official said.
The measures allow a wind-down period until March 12 for sanctioned entities to finish energy-related transactions. Still, sources in Russian oil trade and Indian refining said the sanctions will cause severe disruption of Russian oil exports to its major buyers India and China.
Gazprom Neft said the sanctions were unjustified and illegitimate and it will continue to operate.
Global oil prices jumped more than 3% ahead of the Treasury announcement, with Brent crude nearing $80 a barrel, as a document mapping out the sanctions circulated among traders in Europe and Asia.
The sanctions are part of a broader effort, as the Biden administration has furnished Ukraine with about $64 billion in military aid since the invasion. This includes $500 million this week for air defense missiles, air-to-ground munitions and support equipment for fighter jets.
Friday's move followed U.S. sanctions in November on banks including Gazprombank, Russia's largest conduit to the global energy business, and earlier last year on dozens of tankers carrying Russian oil.
The Biden administration believes that November's sanctions helped drive Russia's rouble to its weakest level since the beginning of the invasion and pushed the Russian central bank to raise its policy rate to a record level of over 20%.
"We expect our direct targeting of the energy sector will aggravate these pressures on the Russian economy that have already pushed up inflation to almost 10% and reinforce a bleak economic outlook for 2025 and beyond," one of the officials said.
LEVERAGE
One of the Biden officials said it was "entirely" up to the President-elect Trump, who takes office on Jan. 20, on when and on what terms he might lift any sanctions imposed during the Biden era.
But any administration wishing to reverse the new sanctions will have to notify Congress and give it the ability to take a vote of disapproval, he said, adding that a number of Republican members of Congress had urged the outgoing President to impose Friday's sanctions.
The military aid and oil sanctions "provide the next administration a considerable boost to their and Ukraine's leverage in brokering a just and durable peace," one of the officials said.
The return of Trump, a Republican, to the White House has sparked hope of a diplomatic resolution to end Moscow's invasion but also fears in Kyiv that a quick peace could come at a high price for Ukraine.
Advisers to Trump have floated proposals that would effectively cede large parts of Ukraine to Russia for the foreseeable future.
The Trump transition team did not immediately respond to a request for comment about the new sanctions.
(Reporting by Timothy Gardner and Daphne Psaledakis, additional reporting by Nidhi Verma in New Delhi, Dmitry Zhdannikov in London, Trevor Hunnicut in Washington and Yuliia Dysa in Gdansk; Editing by Chizu Nomiyama and Alexander Smith)
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