US mulls fresh sanctions on Russian oil

RUSSIA’S OIL FIRMS are demanding penalty clauses and payments in euros instead of U.S. dollars in their annual renegotiation of oil supply contracts with Western crude buyers, as the Russian oil industry is seeking to protect itself from possible new U.S. sanctions on the sector, Reuters reports, citing a number of industry and trading sources.

Buyers, however, are unwilling to yield to the demands.

U.S. lawmakers have been discussing extending sanctionson Russia to energy and oil projects and sovereign debt markets in what Republican Senator Lindsey Graham called a “sanctions bill from hell.”

Just yesterday, the U.S. Department of the Treasury imposedadditional sanctions on officials and entities supporting Russia’s occupation of Crimea, designating three individuals and nine entities for profiting from the annexation of Crimea.

None of the targeted companies are oil companies in this round of sanctions, but the Russian oil industry has apparently grown concerned about sanctions coming its way.

According to Reuters’ sources, Gazprom Neft and Surgutneftegaz, Russia’s thirdand fourth-largest producers, respectively, are having very tough talks with trading houses and Western oil majors who buy their oil. Looking to protect themselves in the 2019 annual contracts from possible sanctions, the Russian firms have demanded clauses such as penalties to be paid if buyers fail to pay, sanctions or not. For most of the Western buyers, these demands are unacceptable, and talks with Gazprom Neft and Surgutneftegaz have been progressing painfully, according to industry sources who spoke to Reuters. Some have reached compromises—one large European buyer has agreed to pay in euros in exchange for Surgutneftegaz dropping the penalty clause.