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The US has tightened sanctions on Russian energy trade transactions, removing an exemption introduced in 2022 designed to keep fuel prices stable, although legal experts doubt the reforms will have a widespread effect on banks. 

When the Office of Foreign Assets Control (OFAC) introduced sweeping sanctions on Russian entities in early 2022, it allowed an exemption for energy-related transactions involving nine lenders, including Sberbank, VTB Bank and Sovcombank, as well as the country’s central bank and national clearing service provider. 

It said at the time that authorising such transactions would “minimise unintended consequences on third parties”, particularly the impact of high energy prices on citizens if significant volumes of Russian oil and gas could no longer be exported. 

In January this year, the outgoing Biden administration amended the authorisation so it would expire two months later, and would only allow the winding down of pre-existing agreements. 

President Donald Trump allowed the authorisation to expire, meaning that as of March 12, US and foreign lenders could face enforcement action if they are involved in energy-related transactions with the listed Russian entities or their subsidiaries. 

Pete Jeydel, a partner at Troutman Pepper Locke and head of the law firm’s sanctions and trade controls team, says the measures bring OFAC’s sanctions on the listed banks “into full effect when it comes to most energy-related transactions”. 

There are still limited exemptions in place, such as transactions involving Gazprombank to facilitate Japanese imports of crude oil from the Sakhalin-2 oil and gas project in eastern Russia,  the Washington DC-based lawyer points out. 

Now, however, Jeydel says “strict OFAC ‘blocking’ rules apply to these sanctioned banks, including broad secondary sanctions for foreign financial institutions”. 

“While the Trump administration’s appetite for imposing secondary sanctions in the Russia context is still in question, financial institutions nonetheless will generally take a cautious approach for the time being,” he tells GTR. 

Jeremy Paner, a partner at Hughes Hubbard and a former OFAC investigator and analyst, says the impact of the change is likely to be limited as banks were already prevented from processing payments or providing financing for new contracts under the wind-down requirement. 

The authorisation “made sense in the early days of the Russia-related programme,” he tells GTR. “But then, as the years went on, and as the sanctions targeting the energy sector of the Russian economy became much more severe, it made less sense. Now, I don’t think it’s very impactful.” 

Lenders and correspondent banks have also generally been cautious around Russia-related transactions, even where general licences are in place. 

“Just because something is authorised under US law, it doesn’t mean the banks have to do it,” Paner says. 

The move comes amid uncertainty over Trump’s longer-term approach to Russian sanctions. The Guardian reported this week that the state and treasury departments have been tasked with producing a list of sanctions that could be lifted as part of diplomatic talks between the two nations. 

But OFAC has continued to target Russia by upping sanctions on its so-called shadow fleet, a large group of tankers used to transport crude oil and fuel products without the involvement of western entities. 

In doing so, Russia is able to export oil without being caught by the G7’s price cap regime, which imposes a limit of US$60 per barrel for crude oil and US$45 or US$100 for certain petroleum products. 

The Centre for Research on Energy and Clean Air (Crea), a campaign group that tracks Russian oil flows, said last week that sanctions targeting specific vessels appear to have resulted in greater use of entities subject to the cap. 

Russian oil transported on tankers owned or insured by G7 coalition members – and therefore subject to the price cap – rose 15% month-on-month in February, it says. 

Crea, which has long called for the cap to be lowered, estimates that slashing it to US$30 per barrel would have cut the Kremlin’s oil export revenue by around €4.3bn in February alone. 

The organisation adds that China and India remain the two largest buyers of Russian crude oil, while Turkey is the biggest importer of the country’s oil products. The EU is the largest buyer of both LNG and pipeline gas, it reports.