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SHEL Shell Plc

2,560.50
0.00 (0.00%)
19 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Shell Plc LSE:SHEL London Ordinary Share GB00BP6MXD84 ORD EUR0.07
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 2,560.50 2,561.50 2,562.00 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Crude Petroleum & Natural Gs 316.62B 19.36B 2.9804 8.59 166.32B

U.S Readies New Energy Sanctions on Russia -- Update

10/09/2014 11:41pm

Dow Jones News


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By Amy Harder And William Mauldin 

WASHINGTON--The U.S. is close to imposing the toughest round of energy sanctions so far on Russia, measures that could also hit Western companies like Exxon Mobil that are working with Russian state-controlled oil companies.

The sanctions, which the European Union is expected to match, would ban energy companies from working with Russia on future oil exploration in the Russian Arctic, deep seas and shale rock formations, according to a U.S. official.

The sanctions wouldn't affect current oil production, but could imperil the future of existing partnerships, including a deal between Exxon Mobil Corp. and OAO Rosneft, the Kremlin-controlled oil giant, to drill in the Arctic Ocean.

Previous sanctions banned only the export of technology that could be used in such projects. Other companies potentially impacted include BP PLC and Royal Dutch Shell PLC.

"It'll deny them some contracts for sure, but it hurts Russia a lot more, " the U.S. official said, referring to Western energy companies. "This puts their future economic growth in danger."

The U.S. official cautioned that the deal isn't final and may not ever be adopted, depending in part on actions by the EU and whether the cease-fire that took effect Friday between pro-Russia separatists and Ukraine holds.

A spokeswoman for the Treasury Department, which takes the lead on U.S. sanctions, declined to comment.

Elizabeth Rosenberg, a former Treasury official who helped implement sanctions on Iran's oil industry, said that such a move, if enacted, "would be extremely significant and would directly impact a number of Western companies that partner with Russian companies."

To offset declining output from older traditional wells, Russia--one of the world's biggest oil-producing countries--is seeking to develop oil fields that are difficult to reach, which often requires cooperation with Western companies.

"The Russian companies that would be affected by this are large companies that generate substantial revenue for the Russian government, and they require partnership with Western companies for technology and access to capital," said Ms. Rosenberg, who is now a senior fellow at the Center for New American Security, a Washington-based think tank.

Exxon spokesman Alan Jeffers declined to say how the new sanctions could affect his company. "We are assessing the sanctions," Mr. Jeffers said by email. "It is our policy to comply with all laws."

A Rosneft spokeswoman declined to comment.

Exxon and Rosneft are drilling now in the Kara Sea before October, when ice will make the Arctic waters unnavigable. The Arctic exploration Exxon and Rosneft are doing, if successful, wouldn't generate meaningful production for years.

Exxon shares fell sharply in aftermarket trading when the news initially broke on Wednesday, though settled at a loss of .06%, to $96.81.

The EU this week approved this new round of sanctions against Moscow, which includes these energy sanctions, but it has held off enacting them while Kiev works with Moscow on a solution to end fighting with separatists in Ukraine's eastern regions.

A meeting Wednesday in Brussels ended without agreement; EU officials were to reconvene Thursday.

Some countries, including Finland, Slovakia and Cyprus, are arguing that there has been an improvement in the situation in Ukraine since the cease-fire, and that the bloc should wait to see how it evolves. Others such as the U.K., Germany and Poland argue the EU should enact the sanctions as promised but lay out clear conditions under which they could be rolled back.

"The issue is now to publish them and therefore enforce them," German Chancellor Angela Merkel told the lower house of parliament in Berlin earlier in the day.

Italian Foreign Minister Federica Mogherini, soon to become the EU foreign policy chief, said in Brussels that the issue may have to go back to EU leaders before a final decision can be made.

The U.S., EU and other Western countries have imposed sanctions on Russia this year after Moscow moved to annex Ukraine's Crimea region. Officials in the U.S. and other countries say Russia's military is participating in fighting inside Ukraine, a charge the Kremlin denies.

The latest sanctions would increase the concerns of business groups that worry that the U.S. efforts to punish Moscow are starting to hurt the prospects of global firms significantly.

Business groups also worry that stricter sanctions will lead Russians to reject Western brands, doing long-term harm to consumer-focused firms that aren't directly affected by the sanctions and aren't facing retaliation from Russian officials.

Russia, which has a much smaller, less diversified economy compared with the U.S. and EU, has threatened to respond asymmetrically to the next round of sanctions, perhaps by banning Western flights over its territory, which would hit European airlines and U.S. freight firms.

U.S. officials say they're working hard to minimize any boomerang effect of the sanctions. Many of the restrictions so far have targeted Russian companies' access to global financial markets, dominated U.S. lenders and others that use the dollar.

According to documents reviewed by The Wall Street Journal, the latest EU sanctions, which haven't been implemented, would further limit the international financing of three Russian energy firms: OAO Gazpromneft, the oil arm of Russia's natural-gas giant; pipeline operator OAO Transneft and Rosneft.

Five state-controlled banks, including giants OAO Sberbank and VTB Group, would also face tighter EU restrictions that cut their ability to borrow in Europe to 30 days, from 90 days in a previous round of sanctions.

The U.S. is expected to match the EU with similar financial restrictions.

"The United States is finalizing measures to both deepen and broaden our sanctions across Russia's financial, energy, and defense sectors," State Department spokeswoman Marie Harf said Tuesday. "We're making our decisions on our own timeline but obviously coordinating very closely" with the EU.

Lynn Cook

, Daniel Gilbert and Laurence Norman contributed to this article.

Write to Amy Harder at amy.harder@wsj.com and William Mauldin at william.mauldin@wsj.com

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