"Crude Oil and Gas Followed by Refined Products: US Discusses Additional Sanctions on Russia"

[Asia Economy New York=Special Correspondent Joselgina] The United States, along with allies including the European Union (EU), is accelerating discussions on additional sanctions targeting Russia's energy industry following its invasion of Ukraine.

According to the Wall Street Journal (WSJ) on the 11th (local time), senior Treasury officials are specifically discussing additional sanctions on Russian energy during meetings held in Europe this week. Sources indicated that a price cap on Russian refined petroleum products could follow. This would target high value-added exports such as diesel, as well as low value-added exports including fuel oil.

Previously, the United States, the EU, the Group of Seven (G7), Australia, and 27 other countries implemented a price cap on Russian crude oil at $60 per barrel starting last month as part of sanctions against Russia's invasion of Ukraine. The sanctions aim to limit the global impact on energy prices while cutting off Russia's funding sources for the war. Additionally, the EU has decided to introduce a price cap on natural gas for one year starting from the 15th of next month.

The WSJ assessed that sanctions on refined petroleum products such as diesel would have a greater economic impact on the Russian economy than the existing crude oil price cap. Unlike the crude oil price cap, which Russia has been countering by increasing exports to countries like China and India, it is expected to be difficult for Russia to find new alternative export markets. Tatiana Mitrova, a researcher at Columbia University's Center on Global Energy Policy, said, "The crude oil price cap was unpleasant for Russia but not that difficult," adding, "However, refined petroleum products will pose a much bigger problem."

The new sanctions are expected to be applied similarly to the crude oil price cap, whereby if the price cap is exceeded, companies from the sanctioning countries will be prohibited from providing insurance and financial services for maritime transport. The WSJ pointed out that transporting refined petroleum products requires smaller and specialized vessels compared to general crude oil tankers, which is also considered a disadvantage for Russia. Even if there are countries willing to purchase, transportation means will inevitably be limited.

Europe, which is highly dependent on Russian refined petroleum, is reported to have secured maximum stocks of diesel and other products ahead of the additional sanctions scheduled for next month.