US, EU set to mount energy press on Russia

WASHINGTON - Reuters

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The United States and European Union plan to stop billions of dollars in oil exploration in Russia by the world’s largest energy companies including Exxon Mobil and BP, U.S. government sources said.

Meanwhile, European Council president Herman Van Rompuy yesterday said that new EU sanctions targeting Russian oil and defence firms will come into force today, but could be lifted after a review of the ceasefire in Ukraine at the end of the month.

Van Rompuy said Thursday that EU member states could propose to “amend, suspend or repeal the set of sanctions in force, in all or in part” depending on the progress of a peace plan in Ukraine.

According to sources, the planned sanctions over Russia’s aggression toward Ukraine would ban U.S. and European companies from cooperating with Russia on searching its Arctic territory, deep seas or shale formations for crude, said two U.S. officials who spoke on condition of anonymity because the measures have not been made public.

The measures, which one of the sources said represented “preliminary thinking,” would expand sanctions the Obama administration announced in July and ban U.S. and EU cooperation on
all energy services and technology in the unconventional oil fields. The previous sanctions only banned some technology at those locations.

Russia, along with the United States and Saudi Arabia, is one of the world’s top oil producers and is the main energy supplier to Europe. But its conventional oil fields are in decline, so it must move to frontier sources in Siberia and the Arctic to keep the oil flowing.

Exxon signed a $3.2 billion agreement in 2011 with Russian company Rosneft Oil Co to develop the Arctic. The Texas-based multinational was considered one of the few companies capable of drilling in the harsh, deep waters there.

The new sanctions, if applied, would be harmful to Russia’s future prospects because they would target fields five or 10 years from producing oil. But application of the sanctions could be prevented if Russia sticks to a cease fire, and depends on several factors including actions by the EU.
The planned sanctions were first reported by Bloomberg.

Once the EU implements the new ban on sharing energy technology and services, the United
States would follow suit with similar measures, including barring the export of U.S. gear and expertise for the specialized exploration that Russians are unequipped to pursue on their own.

Last week, a U.S. envoy in Brussels told Reuters that Washington is considering limiting high-tech exports to Russia’s Arctic energy industry as part of plans to strengthen sanctions.     

Russia’s retaliation

Russia’s response to Western sanctions may include caps on used car imports and other consumer goods, but Moscow hopes that commonsense will prevail in the West, RIA news agency cited a Kremlin official as saying yesterday.

European leaders agreed to push ahead with a package of sanctions against Russia by the end of the week in response to Moscow’s policy on Ukraine.

“We have a number of non-agricultural products where our partners, primarily European, are more dependent on Russia than Russia on them,” Kremlin economic aide Andrei Belousov was quoted as saying.

“This applies, for example, to (caps on) car imports, mainly used cars and on certain light industry goods, not all, but certain types of textiles.”

Belousov also said the government would support companies hit by sanctions. “We are working on support methods,” he said. “It will certainly be provided.” Russia has moved to protect its economy after the European Union and the United States imposed sanctions on officials, banks and companies over Moscow’s support of pro-Russian separatists in eastern Ukraine.