Russia’s Energy Sector Struggles as US Sanctions Hit Arctic Operations

Russia's Arctic oil industry is facing major disruptions due to recent US sanctions targeting tankers and storage infrastructure, according to a Reuters report. These sanctions have led to halted deliveries of crude oil previously purchased by Asian buyers, resulting in growing stockpiles and logistical challenges.

The sanctions affect all three of Russia's key Arctic oil fields—Novoportovskoye, ARCO, and Varandey—which collectively produce around 300,000 barrels of oil per day. With specialized infrastructure and vessels essential for transporting Arctic oil, the sanctions have created significant bottlenecks for the industry, which accounts for 10% of Russia's seaborne oil exports.

According to Reuters, key floating storage units, such as Umba and Kola, along with over a dozen smaller shuttle tankers designed for Arctic conditions, have been sanctioned. Among the affected tankers are the Shturman Shcherbinin, Mikhail Ulyanov, and Aulis, which were actively transporting Arctic crude in recent months.

These disruptions risk leaving millions of barrels of unsold oil stranded in storage, as the Arctic projects lack a logistical system to redirect crude into Russia’s domestic pipeline network. Limited storage capacity could force a reduction in production if shipments remain blocked.

While Lukoil, the operator of the Varandey field, has avoided inclusion in the sanctions list, the broader implications for Russia's energy sector remain significant. With no immediate solutions, the oil may remain in floating storage until alternative buyers or logistics can be arranged.

Previously, it was reported that the latest round of US sanctions targeting Russia’s energy sector could result in Russian oil companies losing up to 27.5% of their maritime oil exports.