The Biden administration said Wednesday it is seeking to degrade Russia’s status as a leading world producer of oil and natural gas by restricting exports of technology related to the energy sector.
The U.S. and its allies “share a strong interest in degrading Russia’s status as a leading energy supplier,” the White House said in a fact sheet describing new export controls, including restrictions on the sale of oil technology.
The approach reflects the administration’s attempt to restrict financial transactions and exports to Russia in a way that maximizes economic pain on the federation while minimizing blowback for European and American consumers. The U.S. and European countries have excluded energy payments from an expanding ban on Russian banks using the SWIFT messaging system for conducting financial transactions. Biden administration officials have vowed they won’t sanction Russian crude.
“The United States and our allies and partners do not have a strategic interest in reducing the global supply of energy, which is why we have carved out energy payments from our financial sanctions,” the White House said in its fact sheet. But, it said, the new export controls will impair Russia’s energy dominance over time “while protecting American consumers.”
It was not immediately clear what oil technology would be hit by the latest wave of export controls—such as equipment to coax oil and gas out of wells or refine crude into diesel and gasoline. A White House fact sheet said the controls would target “oil refining, a key revenue source” that supports the Russian military, but also described “export controls on oil and gas extraction equipment.”
Representatives for the White House and the Commerce Department did not immediately respond to emailed requests seeking a clarification.
The move could accelerate an exodus of energy companies from doing business with Russia, with implications for Halliburton Co., Baker Hughes Co., Schlumberger and other oilfield service firms whose technology is used at oil and gas wells. Representatives for the companies did not immediately respond to requests for comment.
Exxon Mobil Corp., BP Plc, Shell Plc and other energy companies have announced planned exits from Russia in recent days.
Restrictions on equipment used to extract oil and gas could have serious repercussions for Russia, which relies on foreign companies for certain key technologies. Oil-services giant Schlumberger last year combined a pair of its technologies to help Rosneft Oil Co. speed up production for one of its projects. And Exxon’s expertise was key to operating Russia’s Sakhalin-1 oil project.
Spending on fossil-fuel exploration in the region that includes Russia and the former Soviet Union is already expected to grow more slowly than any other part of the world, at a rate of just 6%, according to estimates in December from Evercore ISI.
The U.S. has targeted oilfield technology before. For instance, in 2014, the U.S. and the EU banned exports of some oil-related equipment and technology after Russia annexed Crimea. At the time, Russia relied on hydraulic fracturing for 25% of its oil production. Replacing technology from companies such as Schlumberger would require “colossal funds,” Vagit Alekperov, chief executive officer of OAO Lukoil said at the time.
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