US aims to halve Russia’s energy revenues by 2030, says official

Stay informed with free updates

Simply sign up to the War in Ukraine myFT Digest — delivered directly to your inbox.

Washington is aiming to halve Russia’s oil and gas revenues by the end of this decade, a senior US diplomat has said, arguing western sanctions on Moscow will need to be maintained “for years to come”.

Geoffrey Pyatt, US assistant secretary of state for energy resources, told the Financial Times that the curbs on Vladimir Putin’s ability to fund the Ukraine invasion must ensure Russia can never again mount an attack on its neighbours.

“This is something that we’re going to have to stick to for years to come, as long as Putin persists in this war,” said Pyatt, who has previously served as the US ambassador to Ukraine and to Greece.

Russia has continued to export large volumes of oil since its full-scale invasion of Ukraine in February 2022. However, the International Energy Agency has forecast that its oil and gas exports could fall by at least 40-50 per cent by 2030 if western sanctions on Russia’s energy industry are maintained.

“We’re going to do everything we can to help make that true,” Pyatt said.

“The goal of these sanctions is to change Russia’s behaviour and to ensure that Putin is not in a position, whenever some kind of peace is achieved . . . to use three or four years to rearm and prepare himself and prepare his military for stage three of the Ukraine invasion,” he added.

The US led other G7 countries last year in introducing a price cap on Russian oil exports designed to keep crude flowing but reduce the Kremlin’s revenues. Under the rules, non-G7 countries can continue to buy Russian crude oil but must pay less than $60 a barrel if they want to use western ships or insurers to facilitate the trade. Russian oil imports into the EU, the US and other G7 countries are mostly banned.

While the measures initially resulted in a steep drop in the price of Russian crude, the Kremlin has since developed a new network of traders and vessels to circumvent the restrictions, enabling it to sell to buyers, mainly in India and China, at prices above the cap.

Much of this oil is run via the “shadow fleet” of vessels whose opaque ownership makes them difficult to restrict with sanctions. Some, however, is still moved by western ships operating with western insurance.

Pyatt said the US was looking “for ways to make that shadow fleet less effective”. Asked whether Washington would support measures to force western insurers to demand more information from shippers and conduct more due diligence on vessels carrying Russian oil, Pyatt said: “Watch this space.”

Despite the resilience of Russian oil exports in the past year, Washington argues the restrictions have imposed significant costs on the Kremlin and that by increasing enforcement efforts and tightening the restrictions it can continue to damage Russian revenues.

“My colleagues at the Treasury who lead on this are looking very hard at the question of how do we ensure the continued effectiveness of this policy,” he said.

Washington imposed targeted sanctions in October on two companies for violating the price cap in its first enforcement action linked to the rules, leading analysts and traders to predict a flurry of new measures against individual companies and operators.

In November, the US also announced sanctions on a Russian liquefied natural gas development, known as Arctic LNG 2, in its first direct move against Moscow’s ability to export gas.

Pyatt said “thwarting Russia’s future revenue” was as important as damaging its current finances. “That has enormous geopolitical implications in terms of how the Kremlin is able to behave internationally and Russia’s ability both to use its energy as a strategic asset but also the Kremlin’s ability to continue engaging in revanchism against its neighbours.”