Amid the Russian invasion of Ukraine, President Biden is seeking new ways to punish Vladimir Putin.
US and EU sanctions have damaged Moscow’s banking system. However, Biden exempted Russia’s oil and gas sector, which generates 36% of its revenue, fearing a surge in gas prices would add to already record-high inflation.
According to Biden this week, the objective was to increase the impact on Putin and Russia, while minimizing the harm to us, our allies, and friends globally. Russia accounts for about 8% of US liquid fuel imports.
Sanctions affect the world’s largest oil exporter, with prices soaring on Friday to 2005 levels. Bipartisan majorities agree the US should stop buying Russian oil; senators increased pressure on the White House this week.
Pelosi declared she supported the ban. Her comments came after a hearing in which Biden’s advisers were grilled about the president’s plans to punish Putin more severely.
Cut Off Imports From Russia
According to Texas Rep. Michael McCaul, the top Republican on the House Foreign Affairs Committee, Biden must cut off US shipments of Russian oil to cease fueling Putin’s war machine.
Sen. Mark Warner, a Virginia Democrat, predicted the bill would “strike at the core of the Russian economy.”
Sen. Elizabeth Warren went further. She told Fox News that limiting Russian oil imports should be discussed globally.
Soon after, the administration began to show signs of easing, with Biden’s Council of Economic Advisers chairwoman telling reporters the US was open to several options.
Although the United States does not import much Russian oil, Cecilia Rouse says the United States is exploring measures to reduce its reliance on Russian energy. The most critical thing is to have a reliable global energy supply.
Russia is one of world's largest exporters of oil and gas. If US, European sanctions and/or Russia's responses drive up oil and gas prices, Russia's export revenues will rise and help pay the sanctions' costs. In contrast rising oil and gas prices will feed US inflation.
— Richard D. Wolff (@profwolff) February 26, 2022
Analysts say a US ban would be primarily symbolic, given the high price. Banning US imports shouldn’t substantially boost prices, said Bob McNally, a former Bush administration policy official.
Traders may regard increased penalties as a threat. “That might drive up the price,” McNally added.
In general, the White House does not want to affect Russia’s oil and gas exports, but they’ve lost control on the Hill and must face reality.
McNally asked if Congress would be pleased with an import ban. She went on to say it’d be unlikely.
Like Warren, the former head of Ukraine’s national energy company, Naftogaz, urged the US to intensify its reaction to Russian energy.
Despite Biden’s exemptions, the market was already under pressure, according to Greg Priddy, a geopolitical risk expert, and former Eurasia Group chief energy analyst.
“Right now, there are very few eager customers for Russian oil,” he stated. “They’re not getting any interested buyers,” he added. “They’re trying to sell those barrels at fire-sale prices.”
Other countries’ oil is also susceptible, an unintended result of the broader penalty as traders avoid trading with Russia.
The great patriotic U.S. energy companies are calling for immediate sanctions on Russia oil & gas. With Iranian & Venezuelan oil suppressed & Russia energy out of the market, guess who supplies the gaps? Higher gas prices for us, windfall profits for them. War is a racket!
— Ajamu Baraka (@ajamubaraka) March 5, 2022
Despite European leaders’ assurances to keep Russian oil exempt from US sanctions, Putin’s invasion is likely to speed the shift away from Moscow.
According to David Goldwyn, an energy expert and State Department special envoy and director for international energy issues from 2009 to 2011, refusing to buy Russian petroleum would hugely influence crude prices, bringing them up to $150.
Analysts say escalating penalties on all Russian energy exports risks global economic contraction.