Russia Clashes With Western Oil Buyers Over New Deals as Sanctions Loom

Russia Clashes With Western Oil Buyers Over New Dealsas Sanctions Loom

lya Naymushin / Reuters

Russian energy majors are putting pressure on Western oil buyers to use euros instead of dollars for payments and introducing penalty clauses in contracts as Moscow seeks protection against possible new U.S. sanctions.

Seven industry sources told Reuters that Western oil majors and trading houses have clashed with Russia's third and fourth biggest producers, Gazprom Neft and Surgutneftegaz, over 2019 oil sales contract terms during unusually tough annual renegotiation in recent weeks.

The development mirrors a similar stand-off between Western buyers and Russia's top oil producer, Rosneft.

Earlier this week, trading sources told Reuters that Rosneft wants Western oil buyers to pay penalties from 2019 if they fail to pay for supplies in the event that new U.S. sanctions disrupt sales.

Now sources have told Reuters that Surgutneftegaz and Gazprom Neft have also clashed with their buyers over penalties and the use of euros and other currencies to replace the dollar in contracts.

Latest US sanctions on Russia: incitement to a coup and a new form of protectionism

The latest sanctions seem concerned as much with protecting the US’s economic positions as punishing Russia

by 

ALEXANDER MERCOURIS

April 7, 2018, 21:27

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The latest round of sanctions the US Treasury has imposed on Russia are a strange affair.

Earlier rounds of sanctions have been linked to specific acts of real or alleged Russian misbehaviour e.g. the death of Sergey Magnitsky, the Crimean crisis, the war in the Donbass, the shooting down of MH17, and the alleged Russian meddling in the 2016 US Presidential election.

This latest round of sanctions is different in that it is not directly linked to any Russian action – real or alleged – at all.  Nor are the people sanctioned – for example the Russian businessman Oleg Deripaska – directly accused of anything.

In place of any specific accusation against Russia or any of the individuals concerned, here is how a statement from US Treasury Secretary Steven Mnuchin justifies the latest sanctions:

"The Russian government operates for the disproportionate benefit of oligarchs and government elites.  The Russian government engages in a range of malign activity around the globe, including continuing to occupy Crimea and instigate violence in eastern Ukraine, supplying the Assad regime with material and weaponry as they bomb their own civilians, attempting to subvert Western democracies, and malicious cyber activities.  Russian oligarchs and elites who profit from this corrupt system will no longer be insulated from the consequences of their government’s destabilizing activities. (bold italics added)

In other words Russia is a bad corrupt country which does lots of bad things around the world of which the US disapproves.  Anyone in Russia who is rich (“an oligarch”) and is therefore “profiting from this corrupt system” is in some way responsible and risks being sanctioned irrespective of anything they do unless this changes.