With tempers fraying in Moscow over Germany's suspension of the certification process for the Nord Stream 2 export pipeline, the US, European Union, UK and several other countries have not yet included major energy corporations such as Rosneft and Gazprom, nor Russian joint ventures with Western companies, in a "first" round of sanctions announced in response to President Vladimir Putin's decision to recognise the Ukrainian breakaway regions of Donetsk and Luhansk.

With the exception of Nord Stream 2 itself, sanctions have focused on several Russian banks and the placement of sovereign bonds, as well as key government and state media officials and members of their families.

More than 350 members of the lower chamber of Russian parliament, the Duma, who voted to support the decision to recognise the Donetsk and Luhansk republics, have also been hit with restrictions aimed at identifying and freezing their Western-held assets.

The names of targeted Russians include some of Putin's inner circle of supporters and businessmen alleged to have informal links to the president.

The new sanctions have not had an immediate impact on the country’s economy, with the Russian ruble partially recovering the earlier losses that followed US President Joe Biden’s statement on the crisis this week.

The exchange rate fell below 80 rubles per $1 on 21 February as Putin delivered his lengthy address to the nation on Ukraine, Nato and alleged Western strides against Russia as he announced his decision to recognise Donetsk and Luhansk as independent states.

Pressure tap

Western leaders are understood to have left some room to increase pressure on Moscow if the Russian military and separatists regroup to start an offensive into areas of Donetsk and Luhansk still controlled by the Ukrainian government.

Separatists currently control only about one third of the Donetsk and Luhansk regions and the remaining two-thirds remains under Ukraine’s control.

According to the BBC, a senior official with Biden’s administration said that, if such an invasion proceeds, the US is ready to take further action against Russia’s largest financial institutions, including Sberbank and VTB, which collectively hold almost $750 billion in assets — more than half of all assets held by Russian banks.

“This was the beginning of an invasion and this is the beginning of our response,” the official said.

“If Putin escalates further, we will escalate further, using both financial sanctions and export controls.”

Industry observers suggested that, despite not being targeted in the latest round of sanctions, Russia’s oil and gas sector — and hydrocarbon exports — remain at risk, as the West may decide to target the strong flow of revenues.

Oil prices in Europe have remained above $90 per barrel since Putin’s address and are forecast to continue rising in the long term, despite easing slightly following the announcement about new sanctions.

If oil and gas prices do not fall, a steep surge in revenue for the Russian government could offset any added difficulties in raising capital on international markets following the new sanctions, observers in Moscow have pointed out, together with funding military spending.

International majors at risk

Possible sanctions from the US against the Russian energy sector and its exports could potentially pose risks to investments by international companies, including BP, Shell, Equinor, Wintershall Dea and ExxonMobil, all of which are involved in oil and gas projects in the country.

BP holds a stake of almost 20% in Rosneft, the country’s largest oil producer, and several exploration ventures with the company, while Equinor is involved in the exploration of unconventional oil reserves in Russia, also with Rosneft.

ExxonMobil operated the Sakhalin 1 oil and gas development in Russia’s far east, in which Rosneft is also a shareholder, with both companies also aiming to build a liquefied natural gas plant to start exports to Asia and Pacific after 2026.

Shell, meanwhile, is a key minority shareholder in the Sakhalin 2 project led by Russian state controlled gas giant Gazprom, which also operates the country’s first LNG export plant in the south Sakhalin Island.

Shell is also a shareholder in Russian regional oil producer Salym Petroleum Development, in partnership with oil producer Gazprom Neft, a Gazprom subsidiary.

Shell and Gazprom Neft also plan to explore and develop oil and gas reserves at two blocks on the Gydan Peninsula in West Siberia.