The outgoing US administration has just imposed new sanctions on Russian energy exports. As so often none of the media actually report any detail about the sanctions. Just “sanctions against the shadow fleet and Russian insurers” for example. But; what sanctions? Are Western banks and businesses banned from interacting with them? Probably. Are there secondary sanctions? I.e non Western companies, e.g. Indian, who do business with them will also suffer penalties such as exclusion from the Western system.? None of the media manage to report this key piece of information without which the news does not make much sense – a classic example of how the primary concern of the media is not to inform, but to generate sensational headlines and sell advertising space.
On this news – oil prices have risen by 3%.
Why did the Biden administration do this now? We are told:
The moves from the Biden administration will put the onus on the Trump administration to decide whether to enforce the sanctions. Senior Biden administration officials demurred when asked if the sanctions were discussed with President-elect Donald J. Trump’s transition team but said they expected the measures to provide the next administration with additional leverage over Russia to negotiate an end to the war. [1]
Out of kindness and thoughtfulness then.
One thinks not. I think this is part of leaving Trump with a pig. In this case – an inflation problem. Or he can remove these sanctions and be said to be “soft on Russia”. Like the recent decision to let Ukraine fire longer range missiles into Russia proper. The mess is created for Trump.
* I have read multiple media articles on these new sanctions. Only one even mentions secondary sanctions – thus confirming what I thought. But even here, there are no details. Why is the media simply failing to inform people? The whole idea of the media is something about giving people information so they can form their own opinions about the world. This is linked to fundamental ideas about freedom, citizens’ rights, and democracy. Even “illiberal democracies” allow a media to report news to their citizens. Why cannot the media not do their job? I think the answer is a) to accurately report on this news; what are the secondary sanctions, would require journalists to sit and read the legal papers and government briefings, and that would take up time which means profit for the media organisations and b) that all media operations are geared around headlines, not information, and for the headline you just need to blare “sanctions on oil and gas”. In general the media operate as a kind of middle-man – producing headlines from government press releases. This is just one example, but a good one, of how the media does not do its job of giving citizens the information necessary to, themselves, come to balanced and informed views. The real problem, which happens more in liberal democracies than in “illiberal democracies” is that the next step is politicians adapt themselves to these headlines and try to jockey for a position amongst these headlines, which have already been “dumbed down” and denuded of rationally useful information. You end up with political discourse which is no more than headline shouting. A very sorry state of affairs, for which the media is largely responsible.
It is possible to locate the information about secondary sanctions. For example, the US government release provides detail. [2]:
The Secretary of the Treasury, in consultation with the Secretary of State, issued a determination pursuant to E.O. 14024 that authorizes the imposition of sanctions on any person determined to operate or have operated in the energy sector of the Russian Federation economy.
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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 pursuant to E.O. 14024, run the risk of being sanctioned by OFAC
If I understand this correctly, this implies that secondary sanctions can be applied to foreign, non-Russian, banks which facilitate trades touched by E.O 14024 – which seems to mean energy as well as military activities, as per the above. Since selling oil to, say, a refiner in India, is going to involve an Indian bank, this seems like the kind of sanction that will cause disruption.
This seems to expand the risk of secondary sanctions to “all persons”, beyond financial institutions for E.O. 13662:
Non-U.S. persons, including foreign financial institutions, could also face sanctions for knowingly facilitating significant transactions for or on behalf of the individuals or entities blocked pursuant to E.O. 13662. See FAQs 541-546, 574 for additional information.
E.O. 13662 seems to relate to blocking property and assets. [3]
This seems to open up the possibility of export restrictions (of US goods to them?) for companies who deal with entities sanctioned under E.O. 14024 or E.O. 13662:
Any persons included on the SDN List pursuant to E.O. 14024 or E.O. 13662 may be subject to additional export restrictions administered by the Department of Commerce, Bureau of Industry and Security (BIS).
In addition non Russian companies including, for example, those based in the UAE are directly sanctioned.
I am not a lawyer and have limited time. It looks like the secondary sanctions in the energy sector do not apply beyond financial institutions, unless otherwise specifically sanctioned, but I may be wrong! (Though this would make sense; they might not want to put an Indian refiner out of business who also deals with US interests).
The media – who have well-paid journalists and plenty of resources are much better placed than this web site to read and understand this kind of briefing document, and correlate it with others. But – they choose not to, probably for the reasons suggested above.
Notes