New US Sanctions Target Russia’s Energy Sector
By: Nate Bolin, Jeffrey Orenstein, Myeong Park, and Brian Hopkins
On 10 January 2025, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a package of new sanctions targeting Russia’s energy sector. In an effort to curtail Russia’s oil revenue and ability to evade US sanctions, OFAC issued: (1) a Determination authorizing sanctions on parties operating in Russia’s energy sector; (2) a Determination banning US petroleum services to Russia; and (3) blocking sanctions against oil and gas majors, vessels in the so-called “shadow fleet,” certain traders of Russian oil, Russian maritime insurers, and Russian oilfield service providers.
Operating in Russia’s Oil Sector
The new “Energy Sector” Determination broadens OFAC’s authority to block parties that operate in Russia’s “energy sector,” which OFAC will define in forthcoming regulations to broadly cover activities in Russia’s oil, nuclear, electrical, thermal, and renewable sectors.
Ban on US Petroleum Services
The “US Petroleum Services” Determination prohibits most petroleum services (directly or indirectly) to Russia from the US or by US persons, effective 27 February 2025. OFAC plans to define “petroleum services” to include services related to oil exploration, production, refining, storage, transportation, distribution, marketing, among others. OFAC confirmed this Determination does not ban all US services for maritime transportation of Russian oil, provided services comply with applicable price caps and do not involve blocked parties. FAQ 1217.
Blocking Sanctions
OFAC designated hundreds of entities, vessels, and individuals to the Specially Designated Nationals and Blocked Persons List (SDN List). Notably, these blocking sanctions targeted:
- Gazprom Neft and Surgutneftegas (two of Russia’s biggest oil producers and exporters) and numerous subsidiaries.
- 183 vessels in the “shadow fleet” that aids Russia’s sanctions evasion, including Sovcomflot vessels previously covered by General License 93, which OFAC revoked.
- A network of traders of Russian oil that are linked to the Russian government or otherwise have suspicious ownership.
- Over 30 Russian oilfield service providers.
- Russian maritime insurance providers, Ingosstrakh Insurance and Alfastrakhovanie.
US persons are prohibited from all dealings with parties listed on the SDN List and entities owned more than 50% by parties on the SDN List. The property interests of these parties must be blocked/frozen and reported to OFAC if they are within US jurisdiction or US person possession/control.
General Licenses
OFAC issued several General Licenses (GLs) to authorize: petroleum services for certain projects (GL 121), wind down transactions related to energy (GL 8L), certain transactions for nuclear projects (GL 115A), certain transactions involving Russian oil majors (GL 117, 118, and 119), and safety-related transactions for blocked vessels (GL 120).
Conclusion
These new sanctions increase risk and pose considerable challenges for companies with connections to Russia’s energy sector. While US companies are prohibited from providing most petroleum services to Russia, non-US companies face the risk of blocking sanctions if their operations support the broader Russian energy sector. Although OFAC intends to issue regulations and guidance that clarify these measures, businesses must assess risk now, with the assistance of counsel, to identify effected transactions and implement appropriate compliance measures.