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Breaking news: new EU and US sanctions on Russia go into effect and energy firms are the target

September 12th, 2014 - Posted by Claire Barker in Sanctions

The head of the European Commission, Herman Van Rompuy, announced that the EU will release more sanctions today, 12 September.  Published in the official journal of the European Union (OJEU), the new economic sanctions restrict 'certain services necessary for deep water oil exploration and production, arctic oil exploration or production and shale oil projects in Russia may no more be supplied, for instance drilling, well testing or logging services.'

Russia is the world's largest producer and reserve holder of oil and gas combined and the latest round of sanctions are designed to keep up pressure on Russia where it hurts.

The White House will release a new set of sanctions - also to be unveiled today – which will also include targeting Russian defence companies and arms manufacturers.  In a White House statement released yesterday on the new sanctions, President Obama said 'We will deepen and broaden sanctions in Russia's financial, energy, and defense sectors. These measures will increase Russia's political isolation as well as the economic costs to Russia, especially in areas of importance to President Putin and those close to him.  My Administration will outline the specifics of these new sanctions tomorrow."

Sanctioned energy companies

The new sanctions expand the number of Russian companies banned from raising investment in European capital markets and include three major state-owned oil companies, Rosneft, Gazpromneft and Transneft (see our earlier blog 'Russian sanctions; are oil & gas companies going to be the real losers?'):

  • Rosneft, Russia's largest oil producer was put on the US sanctions list on 16 July and later added to the European Union sanctions list on 29 July. Rosneft is the leader of Russia's petroleum industry and the world's largest publicly traded petroleum company.
  • Gazprom Neft, a state-owned Russian oil company, exports to more than 50 countries and distributes its products for sale through an extensive network of outlets in Russia and abroad. JSC Gazprom Neft currently has almost 1,750 petrol stations in Russia, the CIS, and Europe. 
  • Transneft and its subsidiaries transport oil and oil products. It operates through three segments: Oil Transportation, Oil Product Transportation, and Oil Sales to China.

What impact are the sanctions having?

Using Nexis to scan emerging markets brokers reports, the Veles Capital – Trader's daily - Sep 11, 2014 reports that 'the Russian exchange market did not manage to stay above 1,470 points at MICEX and lost the entire potential of growth gained in the morning. The news of release and introduction of a new portfolio of sanctions on behalf of EU against Russia from Friday was the major reason for reduction. The stocks of companies that are to suffer most from the new sanctions were the top losers: Rosneft (‐ 1.7%), Sberbank (‐3%), VTB (‐2%).'

View the original document: http://reports.aiidatapro.com/brokers/VelesEN/td140911eng.pdf

Copyright: VelesCapital, All rights reserved.

Are the sanctions working?

Last week, Russia and Ukraine agreed to a ceasefire that remains in place despite repeated violations. As part of the agreement, the Ukrainian government and rebel forces exchanged captured prisoners.

The European Commission has agreed to amend or suspend the sanctions when there is evidence of progress in Ukraine.  And President Obama cautioned 'As I said last week, if Russia fully implements its commitments, these sanctions can be rolled back.  If, instead, Russia continues its aggressive actions and violations of international law, the costs will continue to rise.'

What do you think?