On Tuesday, March 8, the White House announced it was further strengthening the sanctions on Russia, with President Biden scheduled to sign an Executive Order (EO) banning U.S. imports of Russian oil, liquefied natural gas (LNG) and coal. This is the first in what we believe may be a series of additional actions the Biden administration will take against Russian energy.
While the White House had sought to refrain from banning Russian energy due to concerns about global energy prices and the ability of the Europeans to replace Russian energy with other sources, the administration softened its opposition upon the overwhelming support for additional measures in Congress. Some see the administration’s ban as an effort to get in front of Congress. Nevertheless, congressional Democrats and Republicans are committed to passing legislation that codifies the ban on Russian energy, which was initially proposed last week by Sens. Joe Manchin (D-WV) and Lisa Murkowski (R-AK) to prohibit U.S. imports of Russian crude oil, petroleum, petroleum products, LNG and coal. The bill had widespread bipartisan support in the Senate, as did its companion legislation in the House, with House Speaker Nancy Pelosi (D-CA) backing the legislation on Tuesday morning.
President Biden’s EO specifically bans:
- U.S. importation of Russian crude oil and certain petroleum products, liquefied natural gas and coal.
- New U.S. investment in Russia’s energy sector, which will ensure that American companies and American investors are not underwriting Vladimir Putin’s efforts to expand energy production inside Russia.
- American financing or enabling of foreign companies that are making investments to produce energy in Russia.
Notably, the EO makes a distinction between LNG imports and a ban on all Russian natural gas, which we believe is an effort to appease the Europeans, who rely on piped Russian natural gas for 40% of their energy needs.
The ongoing war in Ukraine has led to higher global energy prices, and we have seen a significant impact on U.S. energy prices, particularly with regard to gasoline. The Biden administration continues to be in conversations with a range of energy producers and consumers on a path forward to ensure a stable global supply of energy.
The EO marks a divergence from the Biden administration’s efforts to coordinate sanctions regimes with its European counterparts, though it has at least one like-minded ally in the United Kingdom. The UK’s March 8 announcement banned imports of Russian oil, although it gave a longer phase-out period until the end of 2022. While the United States and the UK were more aggressive in their approach towards Russian energy security, the Europeans are taking steps to wean themselves from Russian energy sources. On March 8, the European Commission released a plan to cut Russian gas imports by two-thirds over the next year, a dramatic shift in Europe’s Russian-reliant energy policy that takes into account the urgent need to find alternative sources of energy.
It is unclear what the extent of the new bans on Russian energy will be on global energy prices, with oil expected to rise above $130/barrel and natural gas prices rising in both European and Asian markets.
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