Energy Sanctions Against Russia Could Freeze Exxon's Arctic Drilling

Reports from Bloomberg News and the Wall Street Journal indicate that the U.S. will announce further sanctions against Russia by targeting oil companies with joint projects in the Arctic. This spells particular trouble for ExxonMobil, which has a $500 billion joint venture with Russia’s oil giant Rosneft to drill for extreme oil in the Arctic.

If new sanctions are announced on Friday, they will hit just weeks after Exxon and Rosneft began drilling in Russia’s Kara Sea. Russian President Vladimir Putin reportedly dialed into a teleconference last month to officially launch the drilling, joining the head of Rosneft, Igor Sechin, and the head of ExxonMobil Russia, Glenn Waller, who were together in the Kara Sea. At the time, Sechin called the start of the drilling “the most important event of the year for the global oil and gas industry” and said that developing the Arctic shelf for oil exploration would have “a huge multiplicative effect on the whole Russian economy.”

The Obama administration is hoping that pulling Western support for big oil projects will have an equal and opposite effect on Russia’s economy. This has always been the final shoe to drop in the West’s escalating sanction war against Russia over its role in fomenting the conflict in Ukraine this year. For months, the oil industry’s ties with Russia have felt odd, given the deteriorating relationship between Russia and the West. Even as the U.S. and Europe went after entire sectors of Russia’s economy, targeting its biggest banks, defense, and energy companies, these exploration deals remained intact and began sticking out like a sore thumb. If the West was really serious about punishing Russia, why on earth were our largest oil companies helping Russia tap the key ingredient to its economic power?