5 Insights Re: the Russian Oil Ban’s Cascading Effects

1: A Ban on Russian Oil is a Boon for Iran [Jonathan Schachter]

The U.S. decision to ban imports of Russian oil was undoubtedly welcome news for Iran. Since early 2021, the United States has been negotiating a renewed nuclear agreement with the Islamic Republic (indirectly, with Russia, China and the European Union acting as intermediaries). The deal—which could be announced within days— will undoubtedly allow Iran to resume oil sales, which are currently subject to sanctions. Already spiking oil prices rose further on the news of the U.S. ban, creating an even larger potential financial windfall for the regime in Tehran, which stands to gain rapid access to tens of billions of dollars.

2: Lifting Iran's Oil Sanctions Would Subsidize Iran's Wars [Jonathan Schachter]

Decision-makers would do well to remember that in the three years after the 2015 [Joint Comprehensive Plan of Action] JCPOA nuclear deal was concluded, Iran's "defense" spending jumped by more than 30%, and its support for terrorist groups like Hezbollah and Hamas grew as well. So far, the White House has refused to address the possibility of the U.S. substituting Iranian oil for Russian. In announcing the ban on Russian oil, President Biden asserted that the United States "will not be part of subsidizing Putin's war." The same logic should apply to the war that Iran is waging against the U.S. and its allies around the world.

3: Ample Domestic Production Could Easily Replace Russian Imports [Thomas Duesterberg]

The U.S. has ample production capacity to meet any cutoff of Russian oil imports. Russia supplied slightly more than 700,000 barrels per day of crude oil and products to the U.S. markets last year. If production in the U.S. recovered only half of what it lost from pre-COVID-19 levels, it would easily replace Russian imports.

The new liquified natural gas (LNG) export facilities coming online this year in Louisiana alone could more than meet the gas supplies from Nord Stream 1 which Putin is threatening to shut down. If the Biden administration would relax its assault on U.S. oil and gas production, we could again become a net exporter of crude oil and products and replace all Russian gas exports to Europe from already approved LNG export terminals.

4: Biden ‘Climate Change’ Policy Empowers Adversaries, Punishes US Producers  [William Schneider]

The U.S. government has now initiated discussions with Venezuelan authorities to provide the U.S. with oil as well. Venezuelan oil is abundant, but it is extremely heavy and not economically viable to refine. However, when blended with oil condensate, the oil can be refined. The U.S. is turning to two adversary states—Iran and Venezuela—to replace the oil the U.S. now refuses to buy from another adversary state.

All this is being done to avoid the obvious—increasing domestic U.S. oil and gas production. Preventing additional domestic oil and gas production is done to sustain the administration’s ‘climate change’ policy. Ironically, this will assure retail gasoline prices remain at or near record levels and production levels world-wide will be undiminished.

5: US LNG Refusal Means Europe Subsidizes Russia's Invasion [William Schneider]

While sanctions are having some impact on the Russian economy, Russia's State Armament Budget, which finances Russia’s military modernization and its operations in Ukraine and Moldova, is fully funded by Europe’s energy consumers.

Natural gas prices in Europe jumped 31% on Monday and oil prices by 9% following reports that the U.S. government is likely to block imports of Russian crude oil and refined products. The U.S. refusal to permit increased natural gas liftings, both offshore and on federal land to be exported as LNG, has made it necessary for Europe to continue to subsidize Russia’s invasion of Ukraine through its continued purchase of Russian oil and gas.

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