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Sanctions are broadest yet on Russian energy

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Biden officials say sanctions will cost Russia billions of

dollars a month

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Trump aides were briefed on the sanctions

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Biden officials expect Russia to circumvent sanctions but

doing

so will add costs to its oil industry

By Timothy Gardner and Daphne Psaledakis

WASHINGTON, Jan 10 (Reuters) - The Biden administration

on Friday imposed its broadest package of sanctions yet

targeting Russia's oil and gas revenues in an attempt to give

Kyiv and the incoming administration of Donald Trump leverage to

reach a deal for peace in Ukraine.

The move is meant to cut Russia's oil revenues for the war

that started in February, 2022, and has killed or wounded tens

of thousands and reduced cities to rubble.

The measures are "the most significant sanctions yet against

the Russian energy sector, the largest source of revenue for the

Kremlin's war machine," a senior Biden official told reporters

in a call.

The U.S. Treasury slapped sanctions on Russian companies

Gazprom Neft and Surgutneftegas that explore, produce

and sell oil and 183 vessels that have shipped Russian oil, many

of which are in the so-called shadow fleet of aging tankers

operated by non-Western companies. They also include networks

that trade the petroleum.

Many of those tankers have been used to ship oil to India

and China as the price cap imposed by the Group of Seven

countries in 2022 has shifted much of Russian oil trade from

Europe to Asia. Some of the tankers have shipped both Russian

and Iranian oil.

The logic of the sanctions "is to hit every stage of the

Russian oil production and distribution chain," the official

said. They should cost Russia billions of dollars per month, if

sufficiently enforced, the official said.

The sanctions target oil producers, tankers, intermediaries,

traders, and ports.

"There is not a step in the production and distribution

chain that's untouched and that gives us greater confidence that

evasion is going to be even more costly for Russia," the

official said.

The measures allow a wind-down period until March 12 for

sanctioned entities to finish energy-related transactions.

Still, sources in Russian oil trade and Indian refining said the

sanctions will cause severe disruption of Russian oil exports to

its major buyers India and China.

Gazprom Neft said the sanctions are unjustified and

illegitimate and the company will continue to operate.

Global oil prices jumped more than 3% ahead of the

Treasury announcement, with Brent crude nearing $80 a barrel, as

a document mapping out the sanctions circulated among traders in

Europe and Asia.

The sanctions are part of a broader effort, as the Biden

administration has furnished Ukraine with about $64 billion in

military aid since the invasion. This includes $500 million this

week for air defense missiles, air-to-ground munitions and

support equipment for fighter jets.

Friday's move followed U.S. sanctions in November on banks

including Gazprombank, Russia's largest conduit to the global

energy business, and earlier in the year on dozens of tankers

carrying Russian oil.

The Biden administration believes that November's sanctions

helped push Russia's ruble to its weakest level since the

beginning of the invasion and pushed the Russian central bank to

raise its policy rate to a record level of over 20%.

"We expect our direct targeting of the energy sector will

aggravate these pressures on the Russian economy that have

already pushed up inflation to almost 10% and reinforce a bleak

economic outlook for 2025 and beyond," a second Biden

administration official said.

LEVERAGE

Biden aides have briefed Trump's aides on the sanctions. But

a Biden official said it is "entirely" up to Trump, who takes

office on Jan. 20, on when and on what terms he might lift any

Biden-era sanctions. The military aid and the sanctions "provide

the next administration a considerable boost to their and

Ukraine's leverage in brokering a just and durable peace," one

of the officials said.

The return of Trump, a Republican, to the White House has

sparked hope of a diplomatic resolution to end Moscow's invasion

but also fears in Kyiv that a quick peace could come at a high

price for Ukraine.

Advisers to Trump have floated proposals to end the war that

would effectively cede large parts of the country to Russia for

the foreseeable future.

The Trump transition team did not immediately respond to a

request for comment about the new sanctions.

Any administration wishing to reverse the new sanctions will

have to notify Congress and give Congress the ability to take a

vote of disapproval, said one of the Biden officials, who added

that a number of Republican members of Congress have urged Biden

to impose Friday's sanctions.