US Sanctions Russia's Oil Giants: How Rosneft and Lukoil Crackdown Hits Kremlin

The sanctions aim to degrade Russia's ability to raise revenue for its war machine and support its weakened economy.

"Today's actions increase pressure on Russia's energy sector and degrade the Kremlin's ability to raise revenue for its war machine and support its weakened economy. The United States will continue to advocate for a peaceful resolution to the war, and a permanent peace depends entirely on Russia's willingness to negotiate in good faith. Treasury will continue to use its authorities in support of a peace process," the US Treasury's statement read.

"Now is the time to stop the killing and for an immediate ceasefire," said Secretary of the Treasury Scott Bessent, according to the statement.

"Given President Putin's refusal to end this senseless war, Treasury is sanctioning Russia's two largest oil companies that fund the Kremlin's war machine. Treasury is prepared to take further action if necessary to support President Trump's effort to end yet another war. We encourage our allies to join us in and adhere to these sanctions," he added.

Rosneft and Lukoil are now designated, resulting in the freezing of their assets in the US and restricting US persons from engaging in financial transactions with them. All entities owned 50% or more by Rosneft and Lukoil are blocked, regardless of whether they are designated by OFAC.

According to the statement, Rosneft is a vertically integrated energy company specialising in the exploration, extraction, production, refining, transport, and sale of petroleum, natural gas, and petroleum products. Lukoil engages in the exploration, production, refining, marketing, and distribution of oil and gas in Russia and internationally.

Additionally, OFAC is designating several Russia-based subsidiaries of Rosneft and Lukoil. All entities owned 50 per cent or more, directly or indirectly, by Rosneft and Lukoil are blocked pursuant to EO 14024, even if not designated by OFAC, the US Department of the Treasury said.

As a result of the US action, all property and interests in property of the designated or blocked persons described above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC.

In addition, any entity that is owned, directly or indirectly, individually or in the aggregate, by 50 per cent or more by one or more blocked persons is also blocked.

"Unless authorised by a general or specific license issued by OFAC, or exempt, OFAC's regulations generally prohibit all transactions by US persons or within (or transiting) the United States that involve any property or interests in property of blocked persons", the statement mentioned.

The statement mentioned that any violation of sanctions may result in the imposition of civil or criminal penalties on US and foreign persons.

"OFAC may impose civil penalties for sanctions violations on a strict liability basis. OFAC's Economic Sanctions Enforcement Guidelines provide more information regarding OFAC's enforcement of US economic sanctions. In addition, financial institutions and other persons may risk exposure to sanctions for engaging in certain transactions or activities with designated or otherwise blocked persons", the statement mentioned.

In addition, foreign financial institutions that conduct or facilitate significant transactions or provide any service involving Russia's military-industrial base, including any persons blocked, run the risk of being sanctioned by OFAC.

"Furthermore, engaging in certain transactions involving the persons designated today may risk the imposition of secondary sanctions on participating foreign financial institutions. OFAC can prohibit or impose strict conditions on opening or maintaining, in the United States, a correspondent account or a payable-through account of a foreign financial institution that knowingly conducts or facilitates any significant transaction on behalf of a person who is designated pursuant to the relevant authority", the statement mentioned.

The power and integrity of OFAC sanctions derive not only from OFAC's ability to designate and add persons to the SDN List, but also from its willingness to remove persons from the SDN List consistent with the law.

The ultimate goal of sanctions is not to punish, but to bring about a positive change in behaviour, added the statement.

Any persons included on the SDN List pursuant to EO 14024 may be subject to additional export restrictions administered by the Department of Commerce, Bureau of Industry and Security (BIS).

- ANI