Economy
A key pillar of Russia's wartime economy could soon be taking another hit
Huileng Tan
2024-12-12T09:45:34Z
Janet Yellen
Treasury Secretary Janet Yellen. AP Photo/Patrick Semansky, File
The US could further tighten sanctions on Russian energy exports.
The global oil market is well-supplied, with low prices and reduced demand.
This dynamic presents an opportunity to take further action against Russia, Treasury Secretary Yellen told Bloomberg.
On Wednesday, Treasury Secretary Janet Yellen signaled that the US is eying new restrictions on Russian energy exports, which have been a key revenue source for the Kremlin's war chest.
"What's unusual about this moment is that the oil market seems to be well supplied. Prices are relatively low, global demand is down and there really has been an increase in supply," Yellen said in an interview with Bloomberg TV.
The global oil markets are weighed down by ample supply and demand concerns, in part due to China's flagging economy. Analysts at Macquarie are forecasting a "heavy surplus" next year due to non-OPEC supply growth and "below-trend" demand growth.
International Brent crude oil futures are down 4% year-to-date. US West Texas Intermediate futures are 1% lower over the same period.
"So the global oil market is softer and that creates possibly an opportunity to take some further action," Yellen said.
Yellen said she wouldn't preview any new sanctions, but said the US will continue to put pressure on the Kremlin to end its war.
The outgoing Biden administration is leaving a "difficult legacy" in US-Russia relations, Dmitry Peskov, a Kremlin spokesman, said on Wednesday, in response to the news on the potential new oil sanctions, per TASS state news agency.
The US has been tightening its noose on Russian energy revenues.
In November, the US sanctioned Gazprombank, the last major Russian financial institution exempt from such restrictions. The bank handles major international transactions, including those from the oil and gas sectors.
These developments mark a departure from the stance the US had maintained since the beginning of the war in Ukraine, when the Group of 7 and its allies imposed a price cap on Russian energy and restrictions on Russia's access to Western insurance, brokerage, and maritime services.
The measures have allowed the global energy markets to continue functioning in an orderly fashion — which prevents price shocks and inflation — but still limit Russia's oil revenue.
However, since there is ample oil supply globally amid a lull in demand now, the risk of a spike in prices is lower even if Russian production is taken out of the market.
In light of the West's sanctions against its energy sector, Russia has been selling most of its oil to India and China.
In November, Russia's oil revenue fell 21% from a year ago amid weak energy prices, according to Bloomberg calculations based on official data.