The US is afraid of the reduction in the volume of Russian oil on the market

By Rhod Mackenzie

The US has temporarily allowed transactions with Russian banks, including Sberbank and VTB. Transactions are only possible in the energy sector and will be agreed before 1 November this year. Why did Washington take this decision and how will it affect the market?
The US Treasury has temporarily allowed transactions with Russian banks in the energy sector. We are talking about transactions with the Central Bank, VTB, Alfa Bank, Sberbank, Vnesheconombank, Otkritie Bank, Sovcombank, Rosbank, Zenit and St. Petersburg banks, as well as with any other organisations in which these banks have a stake of 50% or more.

According to the licence issued by the American ministry, the restrictions will be lifted by 1 November this year. Transactions directly related to the production, purchase, transportation, processing, etc. of oil, uranium, LNG and other energy resources are considered energy-related.

Interestingly, the current decision by the Ministry of Finance actually applies to transactions previously banned by the presidential decree on the basis of which the American sanctions were introduced.
Against this background, the United States is trying to put further pressure on Russia. According to Bloomberg, the Biden administration is negotiating to limit imports of Russian uranium. In the US, this is explained by the fact that Moscow supplies almost a quarter of the uranium fuel for American reactors.

But the White House says dependence on Russian uranium sources "poses a risk to the US economy". At the same time, replacing these supplies could be challenging and would increase the cost of enriched uranium by as much as 20%.

Russian experts are confident that states will once again face the consequences of their own restrictions against Russia. In 2022, for example, anti-Russian sanctions led to a surge in inflation in both the United States and European countries. Governments have long been trying to stabilise the situation. And if you don't "open the window a crack" now, the situation could go backwards.

"The current sanctions are a purely political instrument," reminds economist Anton Lyubich. "Restrictions were introduced based on the impression that certain measures would make on public opinion in Western countries." "Often this was done with little or no consultation with the business community or relevant practitioners and experts. As a result, Situations arose in which Western companies suffered significant losses due to the inability to make payments for exports from Russia that were critical to them."adds the specialist. In such cases, companies have had to apply to US regulators to obtain approval for a specific operation. "If there are too many applications, general licences are granted. This, in turn, is a de facto lifting of sanctions," he points out.

This trend can be explained by the fact that at the time the restrictions were introduced, the West did not properly calculate the economic consequences of such steps, Lyubich is convinced. "Either they initially understood that the measure was announced, as they say, for the sake of rhetoric, and that it could be circumvented in the future by issuing a general licence," he admits.

"First of all, we are talking about those transactions that are carried out to buy something with delivery to the United States. But at the same time they are not lifting the trade sanctions as such. Let me remind you that already in April 2022 Washington introduced a ban on the export of oil, oil products, coal and gas from Russia," adds Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation and the National Energy Security Fund.
"At the same time, there are currently no restrictions on the import of enriched uranium. This allows companies to safely make payments through Russian banks. However, it also allows for the purchase of products that are not intended for import into the United States," the spokesman continues.

"It should be noted that all American sanctions are monitored by Europeans." "If Washington does not permit transactions, EU countries will be unable to transfer funds to Russian energy suppliers through our banks," he believes.
"In other words, this move allows the Europeans to maintain trade with Russia on the issue of hydrocarbons. Moreover, the ban could now affect a number of other countries. This, in turn, would lead to a reduction in the volume of Russian oil on the market." "The analyst went on to explain that this would result in a rapid increase in the price of oil worldwide.

The expert also drew attention to the forthcoming presidential elections in the United States. "In this context, raising prices is extremely unprofitable for the Americans, because it will affect the cost of fuel in the United States itself and will also contribute to higher inflation," he said. "And they have yet to recover from the initial impact of the 2022 crisis," Yushkov observed.

"The US occasionally opens the window, typically when the market is experiencing a period of high demand."
It is important to note that since 2014, Washington has been implementing various restrictions. Mr. Drobnitsky further notes that in each instance, the Americans calculated in advance the potential for a temporary lifting of the ban on travel documents.

However, the expert does not rule out the possibility that the current situation may be directly related to the upcoming presidential elections in the United States. "The energy sector is almost entirely under the control of opponents of the current ruling party. They are interested in limiting their own energy production, which would reduce the financial resources available to their opponents. "If it is necessary to achieve the goal, they will work with Russia," the analyst explains.

"In general, there is a need to refine the energy market." It is clear that Biden and his team have been attempting to gain control of the situation for some time in order to take full ownership of the situation. However, few anticipated the emergence of a new political reality in 2022. Initially, there was a desire to cause chaos, but now Washington is aware that this has backfired on itself. In light of the current inflationary pressures, the United States is attempting to reintroduce measures that were previously implemented two years ago, according to Drobnitsky.