United States Bans Russian Oil And Gas And Removes Preferred Trade Status

On Friday, March 11, President Joe Biden asked Congress to end normal trade relations with Russia, a move that, if approved, would clear the way for increased import tariffs.

House Speaker Nancy Pelosi (D-Calif.) said the House will consider legislation revoking Russia’s trade status, and it appears that both Democratic and Republican lawmakers support the idea. She has, however, agreed to “hold off” on bringing a bill to the floor until President Biden can get U.S. allies behind a plan to join the United States.

The only other countries without status are Cuba and North Korea.

The European Union and Group of Seven nations are contemplating a plan to remove preferred status for Russian products. Canada already has revoked Russia’s status. Suspending normal trade relations would allow countries to impose significantly higher tariffs than they apply to other World Trade Organization members.

In another significant move, in an executive order signed last week President Biden banned imports of Russian oil and gas. The order prohibits:

• Importation into the U.S. of Russian crude oil, petroleum, petroleum fuels, oils and products of their distillation, liquified gas, coal and coal products;
• New U.S. investment in Russia’s energy sector;
• Americans from financing or enabling foreign companies that are investing to produce energy in Russia;
• Any transaction that evades or avoids the prohibitions set forth in the order; and
• Any conspiracy formed to violate the prohibitions set forth in the order.

The U.S. Department of Treasury has more information about the order and compliance with it here.

The United Kingdom has taken a similar step while the European Union has committed to a tapered reduction in energy purchases over the next year.

It is unclear what impact the oil embargo will have on U.S. consumers and businesses, but President Biden said there will be some impact, at least. Approximately nine percent of U.S. oil imports came from Russia in 2021. Daily U.S. purchases amount to about 700,000 barrels a day. Russian oil makes up about a third of European imports, or roughly 4.5 million barrels a day.

There are several ways that the Biden administration could help boost domestic production, however, and business groups have asked the president to:

• End the administration’s ban on oil and gas leasing on federal lands and waters and accelerate permitting of new exploration;
• Approve permits for new and expanded LNG export terminals that have been awaiting action for months, and in many cases for more than a year; and
• Ask Federal Energy Regulatory Commission to reverse a new pipeline permitting policy that will hinder the ability to build the energy infrastructure needed to access the plentiful domestic natural gas resources.

Find more information on those options here.