U.S. sanctions drive oil prices to four-month high

Oil prices have been affected by radical American sanctions. The popular Brent crude oil rose nearly 4%, reaching $110 CAD per barrel in the previous session. Meanwhile, as Bloomberg recounts, American West Texas Intermediate reached almost $106 CAD.

The agency notes that the United States imposed its most aggressive and ambitious sanctions on the Russian oil industry on Friday, targeting major exporters, insurance firms, and over 150 tankers.

Dr. Benjamin L. Schmitt, an energy policy expert from the University of Pennsylvania, said the White House's restrictions on the Russian energy sector will significantly increase pressure on the Kremlin but should have been implemented at the start of the war. He added that the new administration should further strengthen sanctions.

When the Joe Biden administration introduced an unprecedented set of sanctions targeting the Russian economy shortly after Russia's full-scale invasion of Ukraine, one key area remained relatively untouched—Russian energy.

The reason given at the time was concerns about rising global oil and gas prices, which, according to the White House, would fail to harm and actually help Russia in financing its aggression. Later, the U.S. and its G7 partners set a cap on the price of Russian oil transported by sea at $82 CAD per barrel. However, this proved largely ineffective as Russia found ways to circumvent these restrictions.

A shift in approach to the Russian oil sector had to wait until the final days of the Biden administration. On Friday, the White House imposed comprehensive restrictions on over 400 entities, including two of Russia's largest oil producers, Gazprom Neft and Surgutneftegas, responsible for more than a quarter of the country's oil exports. White House officials stated that the sanctions affect every phase of Russian oil sales, from production to distribution and trading companies to ports receiving Russian tankers.

In Schmitt's assessment, the new sanctions are significant but delayed.

Actions introduced on Friday, marking the closing phase of the Biden administration, were seen as a positive move toward intensifying energy sanctions on Putin's Kremlin following almost three years of devastating conflict with Ukraine. Nonetheless, the expert noted that such measures should have been enacted earlier in the war and, if effectively enforced, might have already caused significant macroeconomic consequences for Russia, potentially compelling it to rethink its aggression against its democratic neighbour.

Schmitt suggested that these sanctions create opportunities for the Trump administration in the face of planned negotiations to end the war. In his view, the administration should further increase pressure on Russia and "reject the gradual approach" to sanctions seen during the outgoing administration.

Achieving a fair and lasting peace in Ukraine will require applying the maximum sanction pressure. According to Schmitt, the new Trump administration should act promptly to broaden the scope of these recently introduced sanctions as soon as it assumes office.

As he added, it would demonstrate both that the U.S. remains committed to Europe’s security and that it is ready to take decisive measures.

Daniel Fried, former U.S. ambassador to Poland and Atlantic Council expert, shares a similar opinion.

- This is really a good farewell gift for the new administration and if Trump’s people are wise, they should take immediate advantage of it," said the former diplomat. In his view, the new sanctions are serious and have the potential to deliver a significant blow to Russia's economy.

He also noted that the timing of these measures is related both to the United States significantly increasing its oil production in recent years and the post-election period when oil and gas prices do not carry as much significance in domestic politics as during an election campaign.