Espreso. Global
OPINION

Elections, oil, sanctions. The plot thickens

5 July, 2024 Friday
15:19

WSJ writes that Biden wants to be tough on Russia and Iran, but also wants low gas and oil prices

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Therefore, softer than expected sanctions are being imposed on Russia, Iran, and Venezuela. The president's moves have disappointed some employees of the US Treasury Department.

What is the reason for Biden's concern? According to the U.S. Department of Energy, the average price of a gallon of gasoline was $3.44 earlier this week. This price is approximately the same as it was a year ago but represents a notable increase compared to four years ago.

What are the imposed sanctions?

  1. The June 12 sanctions against Russia left the country's oil industry almost untouched, although they hit the financial sector hard.
  2. On June 25, the United States imposed new sanctions on Iran. According to analysts, these measures affect only a small portion of the country's oil exports and are unlikely to affect world markets. Exports from Iran have exceeded 1.5 million barrels per day, which is significantly more than at the beginning of Biden's presidency. Most of this oil is purchased by China.
  3. In addition, the Biden administration is trying to expand market access to sanctioned oil from Venezuela. They have not reimposed all the sanctions that were lifted last year, even though Venezuela did not comply with the agreement.
  4. Some U.S. Finance Department officials are disappointed that the U.S. has not taken action against oil trading networks that transport Russian and Iranian oil.

Supporters of this policy in the administration said that these steps are well balanced to keep prices low, but create obstacles to the oil export mechanism of Russia and Iran, meaning they earn less from each barrel sold.

The US National Economic Council and other Biden administration officials are concerned that broader measures will lead to logistical problems in the oil market and increase inflation. According to analysts, the increase in oil production in countries under sanctions is one of the reasons why oil prices have fallen from their highs in early 2024.

In addition to limited sanctions, the U.S. government is trying to secure additional oil flows from Iraq. Last month, a State Department delegation visited Northern Kurdistan to try to reopen a pipeline connecting the oil-rich territory to Turkey. A political dispute between Turkey, Iraq and the semi-autonomous Kurdistan region has blocked the pipeline since early 2023. The pipeline itself is 60% owned by Russia-controlled Rosneft Oil, and the company receives money when oil flows through it. At the end of last year, Rosneft sent a group of traders to Kurdistan with a similar task.

I can only remind you of a few important points.

I have written many times that most of our partners are not interested in seeing Russian resources disappear from the market. This is very painful for the global economy.

It was because of the price of oil and oil products that Washington asked Ukraine to stop attacking some Russian refineries. It is good that we refused to fulfill this request.

Biden's energy policy often conflicts with environmental policy. The U.S. oil and gas industry is now at its peak. Production is over 13 million barrels per day (an all-time record). Exports have risen sharply, as have profits. But oil market players see the administration's environmental agenda as a threat to them. Trump is using the situation in his political campaign.

Biden is having a hard time maneuvering between the environmental agenda that is important to many of his voters, the need to keep fuel prices reasonable, and the interests of voters in different regions. As a result, we have to look for external instruments that will keep oil prices at an acceptable level.

We have not been given an ideal scenario, so we have to work with what we have.

Source

About the author. Yuriy Bohdanov, publicist, specialist in strategic communications in business, public administration and politics

The editors do not always share the opinions expressed by the blog authors.

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