![](https://webarchive.library.unt.edu/dentonfracking/20141023162246im_/http://static01.nyt.com/images/2014/03/28/business/Energy/Energy-master675.jpg)
As the United States seeks to strengthen sanctions on Moscow for its occupation of Crimea, energy experts say the powerful Russian oil industry would make a robust target. But any penalties on energy investments, technology transfers and financial transactions would most likely also punish Western oil companies like Exxon Mobil that are investing heavily in Russia.
“Everything is on the table,” said David L. Goldwyn, the State Department’s coordinator for international energy affairs during President Obama’s first term. “The calculus has to be who will be hurt most, us or them, if sanctions are put in place.”
As the heart of the Russian economy, the energy sector — led by state oil companies like Gazprom, Lukoil and Rosneft — would be a natural focus for pressure from the United States and its allies. Oil and petroleum products represent more than two-thirds of Russian export earnings, and they finance just over half of the federal budget.
But the rub is that the interests of the Russian companies — many led by powerful allies of President Vladimir V. Putin — are increasingly entwined with those of American and European corporations, with which they share critical projects.
![](https://webarchive.library.unt.edu/dentonfracking/20141023162246im_/http://static01.nyt.com/images/2014/03/27/multimedia/nytm-032814-midnight/nytm-032814-midnight-videoSixteenByNine600-v2.jpg)
Times Minute | Crimea Transitions
Signs of transition are emerging in Crimea, two weeks after its vote to secede from Ukraine.
Video by Christian Roman on Publish Date March 28, 2014. Photo by Pavel Golovkin/Associated Press.Exxon Mobil, which is based in Texas and has been investing in Russia for two decades, is exploring for oil and gas in the Russian Arctic and has several joint ventures with Rosneft in and outside Russia. Most notably, the company operates and owns a minority stake in what it describes as the largest offshore oil and gas project in the country, Sakhalin 1, which Exxon Mobil says will produce 630 million barrels of oil.
Exxon Mobil’s oil and gas production in eastern Siberia now represents less than 1.5 percent of the company’s worldwide output. But the company’s participation in Russian oil operations is important for its future, and for the Russian energy sector.
Russia hopes Exxon Mobil can aid in shale oil development in Siberia and in offshore Arctic exploration. These new oil production sources, energy experts say, are critical if Russia hopes to maintain its output of 10 million barrels a day, which is expected to decline by a million barrels by the end of the decade.
At a conference with Wall Street analysts on March 5, Rex Tillerson, chief executive of Exxon Mobil, said, “In terms of our view of country risk, our view of the geopolitical risk and our ability to manage that, other than things like sanctions, which have affected us before, we don’t see any new challenges out of the current situation.”
“That statement still stands,” Alan Jeffers, a company spokesman, said Thursday.
Just last year, Mr. Putin gave Mr. Tillerson the Order of Friendship award as a token of Russia’s gratitude to the company.
Other Western oil companies also face potential difficulties in Russia. BP has sold many of its Russian holdings, but it still holds a 19.6 percent stake in Rosneft, which contributed $1 billion in profit to BP in the fourth quarter of last year. Eni of Italy and Statoil of Norway also coordinate with Rosneft in Arctic exploration. Eni and other Western companies are heavily involved in plans by Gazprom to build a major gas pipeline from Russia to Europe, but that project is now in doubt, according to Eni’s chief executive, Paolo Scaroni.
Royal Dutch Shell and Total, the French oil giant, are invested in the nascent Russian business of exporting liquefied natural gas. Several Western service companies are also involved in Russia, drilling and completing wells with the newest hydraulic fracturing technologies.
Sanctions on investments, technology deliveries and financial transactions have been central to United States policy toward Iran and North Korea in recent years, but energy and foreign policy experts say the intimate links between American and Russian energy companies would make sanctions on Russian energy companies awkward if not painful for the West, and the sanctions would probably be resisted by Western oil companies.
“Russia is deeply integrated in the global economy and that creates challenges for any sanctions strategy,” said Michael A. Levi, a senior fellow for energy and the environment at the Council on Foreign Relations. But he added that stronger sanctions might eventually be necessary “because we have a big problem.”
Energy experts say tough sanctions on Russian oil companies would require coordination with Europe, and maybe tacitly with China, so that Russian companies would not simply replace American partners with other foreign companies.
“It was easier to do this with Iran, because how many American companies were doing business with Iran after 1979?” noted Helima Croft, a foreign policy expert at Barclays Capital. “Escalating to sanctions on relations between U.S. and Russian companies would require a more significant escalation by Russia,” like an invasion deeper into Ukraine, she added.
So far, Congress has increasingly pressed the Obama administration to quicken the pace of approvals for natural gas export terminals, with the aim of easing European dependence on Russian gas. The Energy Department has been only gradually approving such terminals, which in any event could not alleviate European dependence until nearly the end of the decade.
The administration’s sanctions have been broadly worded but specifically involve only limited asset freezes and travel bans. Gennady Timchenko, a billionaire oil trader and one of Russia’s richest businessmen, has been a target of the sanctions, along with two oil contractors.
In a recent commentary, Julia Nanay, a Russia and Caspian region energy expert with the IHS Energy consultancy, predicted that Western sanctions would slow investment into Russia at a time when Russian companies are starting projects for exploration, pipelines and the export of liquefied natural gas.