The U.S. Treasury’s Office of Foreign Assets Control (OFAC) said its initial analysis shows the measures are meeting their objective of cutting Moscow’s income from crude exports and could significantly reduce Russia’s oil sales over time.
OFAC said the impact is coming mainly through lower prices for Russian crude, which directly erodes the government’s ability to finance its military campaign in Ukraine.
Several key grades of Russian oil are now trading at their lowest levels in many years, OFAC said, calling the situation unprecedented and a growing concern for Russian authorities and executives at major oil companies.
More than 10 major buyers in India and China have announced plans to halt purchases of Russian crude for December deliveries, OFAC added, describing that as a sign sanctions are starting to bite not only politically but in day-to-day market activity.
Citing data from Bloomberg, the statement said prices for Russia’s Urals crude fell last week to their lowest point in more than two and a half years. The drop reflects not only new sanctions but also mounting pressure from Russia’s trading partners, OFAC said.
Refineries in China, India and Turkey had already begun trimming purchases of Russian oil and seeking alternative suppliers even before some of the latest restrictions took effect, according to the statement.
Experts quoted in the OFAC analysis warned that such a sharp price decline could have lasting consequences for Russia’s economy. Revenues from oil and gas exports account for about a quarter of the federal budget, and any sustained fall would create serious fiscal strains for the Kremlin as it faces rising costs for the war and domestic stability.
Under sanctions announced in October, companies worldwide have until Nov. 21 to end business with Rosneft and Lukoil or risk exclusion from the global dollar-based financial system.
Losing access to U.S. currency and international capital markets would pose severe challenges to firms that continue dealing with the Russian producers, OFAC said.
“Sanctions are starving Putin’s war machine,” a U.S. Treasury spokesperson said. “We are ready to take further steps if needed to help end the senseless killing in Ukraine.”
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Source: RMF24