EU Bans New Energy Investment in Russia

The EU has announced a broad ban on new investment in Russia’s energy sector as part of a new round of sanctions in response to Moscow’s invasion of Ukraine.

The new measures — coordinated with the US — also prohibit transactions with certain state-owned companies, including oil giant Rosneft and pipeline operator Transneft, but not with gas giant Gazprom.

They also bar European credit rating agencies from assigning ratings to Russian companies and the country’s sovereign debt.

“These sanctions will further contribute to ramping up economic pressure on the Kremlin and cripple its ability to finance its invasion of Ukraine,” the European Commission said as it announced the package on Tuesday.

The commission noted that the ban on new energy investment does include some “limited exceptions.”

This latest package also includes a ban on imports of steel products into the EU from Russia as well as a ban on exports of luxury products from the EU to Russia, including high-end cars and jewelry.

The EU has also agreed to deny Russia “most favored nation” status, suspending benefits that country previously enjoyed as a member of the World Trade Organization. The G7 nations had already taken the same step.

Like previous rounds of EU sanctions, the latest package does not directly ban purchases of Russian oil and gas because the 27-nation bloc is highly dependent on energy imports from Russia.

Corporate Responses

International oil companies and others were still assessing the latest EU sanctions on Tuesday.

But several major players such as BP, Shell and Exxon Mobil have already announced plans to divest upstream oil and gas assets in Russia, refrain from any new investments and wind down their purchases of Russian oil.

Those moves were prompted by their disapproval of Russia’s attack on Ukraine, earlier rounds of sanctions and concerns about reputational damage if they keep doing business in or with Russia.

On Monday, for example, Norway’s Equinor said it would stop trading Russian oil, in addition to its earlier decision to exit upstream projects in Russia.

But like some of its peers, Equinor said it would take some time to wind down trading links with Russia because it still has “commitments arising out of contracts entered into prior to the invasion.”

These includes contracts signed in January under which the Norwegian company will take delivery of four oil cargoes this month.

Two of those cargoes were resold to Asian buyers while a third cargo will be delivered to one of the company’s storage facilities. The fourth will supply its Mongstad refinery in Norway.

“Receiving these cargoes is in full compliance with current sanctions,” the company added.

Germany's RWE Cites Risks

German utility RWE — a major importer of Russian gas — said a " further escalation of the conflict and discontinuation of supply relationships with Russian companies could have notable effects on our assets, liabilities, financial position and profit or loss."

And an industry source told Energy Intelligence on Tuesday that a cargo of Russian LNG was abruptly diverted away from the import terminal in Bilbao, Spain, where it was due to be delivered to Naturgy.

TotalEnergies currently remains an exception among large European oil and gas companies, having said that it will retain its extensive investments in Russian LNG, although it will not make any new investments in the country.

Greenpeace and Friends of the Earth have threatened to sue the company unless it cuts business ties with Russia.