Analysis by Energy Workforce SVP Government Affairs & Counsel Tim Tarpley
As the Russian assault on Ukraine continues and appears to be focusing on civilian areas and cities, the world is increasingly looking at any and all options to force Russian President Putin to change course. The situation is changing rapidly, and the initial round of sanctions and actions are only expected to grow as violence against civilian populations increases.
Shortly after the initial invasion, the United States responded with a round of sanctions by adding four Russian banks (and their subsidiaries) to the sanctioned party (SDN) list, adding Sberbank to the List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions (CAPTA List), imposing debt and equity restrictions on 13 Russian entities, sanctioning a number of additional “Russian elites” and their family members, sanctioning 24 Belarusian individuals and entities due to Belarus’s support for, and facilitation of, the invasion, and implementing new export control restrictions as applied to Russia.
In the following days, the European Union followed suit and spurred joint action by both the EU and U.S. to block final certification of the Nord Stream 2 pipeline as well as taking the initial steps to remove Russia from the SWIFT banking system.
Despite political discussions in both the EU and U.S. regarding blocking Russian oil and gas imports, direct action along these lines has not yet been taken. On Tuesday, Sen. Joe Manchin (D-W. Va.) urged President Biden to block Russian imports and replace them with an increase in domestic production. There was no mention of such a move during the State of the Union address, but the White House continues to signal that such a move could be in the works. Also, many shipping companies have announced they will not service Russian ports, creating a de-facto trading blockade that will likely affect energy shipments out of the country absent an official blockade.
In reaction to these fast-moving events, as well as the prolonged energy crisis felt throughout the winter, the EU released a new aggressive strategy on March 2 in an attempt to ween itself off Russian energy. The proposal calls for a 40% reduction in fossil fuel use by 2030 and requires EU energy companies to fill their storage tanks with natural gas this summer so the continent will not be as reliant on Russian gas next winter. Europe’s gas storage is currently 32% full compared with about 40% a year ago. This announcement opens up significant opportunities for U.S. companies to fill the demand void left by a decrease in Russian oil, as well as by providing new energy technologies to the continent.
In anticipation of supply constraints by caused by the crisis, the United States and international allies will release 60 million barrels of crude oil from their strategic reserves. The release will come from the United States and the 31 member countries of the International Energy Agency’s governing board. The IEA countries hold emergency stockpiles totaling 1.5 billion barrels. This release will likely be more significant then past emergency releases, as it is being done in conjunction with allies abroad and constitutes a bigger percentage of worldwide demand.
State of the Union
President Biden gave his annual State of the Union Speech on Tuesday night and stayed noticeably distant from specifics on energy, despite touting the potential of electric cars. Gone was any discussion of curbing domestic energy production but discussion of how the U.S. can help Europe ween itself off of Russian energy was also noticeably absent. Concerns regarding the Department of Interior’s inaction to appeal a recent ruling in regard to offshore leasing were also not addressed. With the price of oil continuing to rise, we can expect energy to remain the hot topic in Washington second only to the Russia-Ukraine war.
If you would like to get involved with the Council’s advocacy efforts or the Government Affairs Committee, contact SVP Government Affairs Tim Tarpley.
Tim Tarpley, SVP Government Affairs & Counsel, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.