The realization that the European Union (EU) and the United State of America (U.S.A) are not ready to sanction Russian energy sector has brought down oil prices, analysts at Proshare have said.
The U.S. imposed sanctions on Russia’s largest banks— Sberbank and VTB—but provided broad exemptions on payments for purchases of crude oil, natural gas, fuel and other petroleum products.
The EU, meanwhile, chose not to sanction them for now. Already-sanctioned banks will be kicked off swift, but others will be allowed to stay.
A senior Biden administration official said Saturday that officials were carefully selecting which Russian banks to eject from the Swift network to minimize disruption of energy markets.
“We know where most of the energy flows occur, through which banks they occur,” the official said. “And if we take that approach, we can simply choose the institutions where most of the energy flows do not occur.”
“Russia’s invasion of Ukraine on Thursday shocked the world and sent oil prices soaring above $100, the relatively tepid reaction of Western leaders has brought oil prices back down on Friday as it becomes clear that Russia’s energy exports are unlikely to be sanctioned.
“One might think that Russia’s invasion of Ukraine would have triggered a much stronger response from the international community. Instead, there seems to be hesitancy and squabbling between European leaders”, said analysts at Proshare.
The fact that oil prices are hovering around $100 per barrel and gas prices have skyrocketed to $50 per mmBtu will certainly have played a role in feeding this hesitancy. It seems that Russian oil and gas flows are too important to international markets for Western powers to target them with sanctions.
“The lack of sanctions on Russia’s energy exports is the main reason we have seen oil prices fall back last Friday”, said Proshare.
