G7 prepare ‘stage three’ sanctions against Russia
LEADING energy companies like BP and Shell face an extremely delicate situation as the world’s G7 powers prepare to launch the next wave of sanctions against Russia, as they may be forced to curtail operations or freeze commercial ties with the country.
The US, Japan, Germany, Britain, France, Italy and Canada have agreed to intensify targeted sanctions to increase the costs of Russia’s actions – possibly as soon as this week – unless the Kremlin takes immediate steps to defuse the crisis in Ukraine.
The G7 is for now holding back Iranian-style “stage three” sanctions against the whole Russian banking system, mining industry, or the oil and gas nexus.
This option will be deployed only if Russia escalates from covert operations in eastern Ukraine to an outright invasion, Alastair Newton, head of political risk at Nomura, said.
Shell confirmed yesterday it would comply with all international sanctions.
Diplomats say the Obama administration has the means to choke Russia’s bond market and greatly disrupt the energy sector even under limited “stage two” sanctions, and intends to do so in a step-by-step escalation.
Washington sources say the US Treasury may soon extend the blacklist to Igor Sechin, president of oil giant Rosneft, the world’s biggest traded oil firm.
Any such move would be a costly headache for BP, which owns 19.75% of Rosneft’s shares.
It is unclear whether BP, a British-based company, could continue to operate in the US or even carry out its global business smoothly if it continued to be a Rosneft shareholder with Sechin still in charge.
However, BP said yesterday it remained committed to its investment in Rosneft.
The US’s Exxon Mobile would also have to reconsider its drilling plans with Rosneft in the Arctic “High North”.
The US Treasury is also eyeing some form of sanction against Gazprombank, the financial arm of gas monopoly Gazprom.
Sechin has long been a controversial figure. A former KGB of- ficer in Africa and part of President Vladimir Putin’s core of loyalists from the security apparatus, he has been the chief architect of Russia’s energy policies for the last decade and is famously known as a fighter who takes no prisoners.
While the energy industry generates 52% of Russian government revenues – some claim nearer 70% – the lion’s share of this comes from oil rather than gas.
Gazprom’s deputy chairman, Alexander Medvedev, said in London sanctions were not the solution.
“They will push up the price of oil and gas, and damage the competitiveness of Europe, so who does this help?” – The Telegraph