On November 2, the U.S. State Department announced a new round of sanctions targeting eight entities involved in Russia’s energy, metals, and mining sectors, among others. The designations specifically targeted the operator of the Arctic LNG 2 project in the latest effort to limit Russia’s future energy revenue.

The sanctions come amid reports from the Wall Street Journal that rising Russian oil revenue has allowed Moscow to withstand the oil price cap the G7 and allies imposed in December 2022, from the Financial Times that Russia is increasingly avoiding the price cap mechanism through various means, and from the Washington Post that the U.S. military might have unknowingly purchased Russian oil. Russia’s budget deficit is expected to meet Moscow’s target of 2% of GDP by the end of the year, despite earlier predictions that it could considerably exceed that level and reach 5% to 6%. Other data shows that Russia’s oil and gas revenue doubled to $17.6 billion in October, buoyed by the shrinking gap between Urals and Brent crude prices and Russian oil firms exceeding Moscow’s oil export limit.

Why it matters: Russia’s energy revenue rebound is a considerable turnaround from earlier this year, after a 46% decline in January 2023 from the year prior, and may encourage the U.S., EU, and some partners to seek additional measures to limit Russia’s ability to fund its war in Ukraine. Over 50% of Russian crude ships without western insurance, the trigger for the oil price cap; this is a 15% increase from January 2023. Moscow has relied on a so-called ‘shadow fleet’ of oil tankers and other arrangements, such as inflating shipping and other costs to keep formal prices under the cap, to skirt Western sanctions. Falsifying paperwork is relatively easy for shippers willing to take the risk. Because fake papers are not easy to detect, these risks may be lower than the price cap coalition would prefer. Moscow is planning $100 billion for its 2024 defense budget, a 700% increase and post-Soviet record.

Russia’s economy is by far the largest that Western policymakers have sought to punish through economic sanctions; according to the World Bank, its economy was the world’s eighth largest in 2022. While the combined U.S. and EU economies are 15-20 times larger, they—and other economies, large and small—remain critically dependent on oil and are unlikely to eliminate this dependency in the foreseeable future. Russia exported nearly 12% of all the crude oil in global markets in 2021, a volume sufficient to wreck the global economy if it disappeared from markets.

Measures like the price cap, or other sanctions targeting Russian oil without blocking its sale or purchase, increase transaction costs for Russia but also increase uncertainty in global markets, supporting higher prices. At the same time, these measures rewire the global economy and create new trade relationships that did not previously exist—such as India’s role as a leading buyer of Russian oil—and that are explicitly structured to avoid sanctions regimes. Over time, these new relationships diminish the effectiveness of past sanctions, requiring new sanctions on a continuous basis to create sustained challenges for Russia and uncertainty in global markets. Time will tell whether Western policymakers can develop impactful new sanctions tools on an ongoing basis.

On November 2, the United States Energy Information Agency (EIA) published data revealing an increase in U.S. coal exports since the EU enacted its ban on Russian coal in August 2022. U.S. coal exports increased by 5.7 million short tons (5.17 million metric tons) between August 2022 and July 2023, compared to the same period year-over-year, driven primarily by a 22% rise in U.S. coal exports to Europe (to 30 million metric tons). Reducing Europe’s reliance on Russian fossil fuels is a core EU objective and a key goal of the joint U.S.-EU Energy Security Task Force.

Why it matters: As the EU seeks to further reduce Russia’s share of its energy imports, trade with the U.S. has grown substantially to fill the void. According to Eurostat, Russian coal constituted nearly 33% of EU imports in Q2 2022, prior to the bloc’s coal ban, and Europe was Russia’s largest coal market prior to its invasion of Ukraine. Since then, America’s share increased by over 5% to nearly 26%, a development that made the United States the second largest exporter to the EU. Meanwhile, U.S. coal production increased for the first time in ten years.

While the U.S. share of EU LNG imports has declined slightly, from 49% in Q2 2022 to 46% in Q2 2023, the EU’s overall LNG imports reached an all-time high in 2022 and may continue to grow if EU states accept natural gas as a crucial ‘transition fuel’ to meet climate goals. Combined with America’s role as a top coal supplier and the fact that the U.S. is more-or-less tied with Norway as the bloc’s largest source of crude oil, at 13.3%, the United States is emerging as a critical fossil fuel supplier for Europe even as the EU and the Biden administration seek to reduce fossil fuel consumption. Moreover, while America’s new role as a European energy supplier does not (and cannot) rival Russia’s former role, and U.S. exporters are not state-owned or controlled, a possible future Trump administration might nonetheless see U.S. energy exports as leverage in U.S.-EU (or U.S.-NATO) relations. Whether with partners or with rivals, economic integration can prove to be a double-edged sword.

On October 26, Russian state nuclear firm Rosatom and UAE logistics company DP World agreed to a joint venture to increase container shipping along Russia’s Northern Sea Route (NSR). DP World accounts for 10% of global container shipping by volume, with 80 container terminals across 40 countries. Rosatom has assumed a growing role in managing Moscow’s Arctic ambitions, including a nuclear-powered icebreaker fleet essential for year-round travel. The deal represents the latest effort to attract foreign investment in Russian energy, mining, and shipping projects in the Arctic. In July, the United States imposed sanctions against Rosatom subsidiaries that provide maritime technology and against Russia’s Sakhalin Shipping Company. These preceded new sanctions against the Arctic LNG 2 project.

Why it matters: In the face of increasing Arctic sanctions by the U.S. and its allies, Moscow will need to find more foreign partners to supply investment and technology to achieve its ambitious Arctic energy and shipping goals. In 2022, the Russian natural gas producer Novatek partnered with UAE-based Green Energy Solutions to acquire technologies barred by existing U.S. sanctions (Green Energy Solutions later became a target for sanctions in September 2023). UAE-based Sun Ship Management transported 70% of Russian energy revenue before it also came under EU sanctions in February 2023.

Russia’s Ministry for Development of the Russian Far East recently updated its forecast for Russian NSR shipping in light of sanctions and production delays to its Arctic projects. Its most conservative forecast estimates the NSR will carry 117 million tons of cargo by 2030 (previously 150 million tons). Even this more modest target would more than triple the amount of cargo shipped in 2022 (34 million tons). Russia also plans to finance 150 Arctic projects worth approximately $20 billion, including forty-six emergency rescue vehicles and a new “Leader” flagship icebreaker project. An EIRP report on Russia’s Arctic development argues that Russia will struggle to meet its shipping goals due to limitations in its existing icebreaker fleet and its inability to build or acquire new icebreakers in secondary markets.

On November 1, Gazprom and Uzbekistan’s Energy Ministry signed a strategic cooperation memorandum on gas supply and transportation, as well as on hydrocarbon production. A Gazprom statement commemorated the deal and emphasized the importance of a stable energy corridor between Russia, Uzbekistan, and Kazakhstan. On October 7, Uzbekistan began receiving pipeline natural gas from Russia via Kazakhstan; this followed a June deal for 9 million cubic meters/day (mcm/d) to offset Uzbekistan’s higher winter demand. The new deal came on the same day that Gazprom signed a separate strategic cooperation agreement with Kazakhstan. The Russian-Kazakh agreement pledges deeper cooperation in the exploration, supply, transportation, processing, and production of natural gas.

Why it matters: Despite producing 52 billion cubic meters (bcm) of natural gas per year, Uzbekistan has increasingly turned to its neighbors to satisfy its growing domestic demand. Including a separate agreement with Turkmenistan signed last December, Uzbekistan currently imports 44 mcm/day. Uzbekistan is attempting to avoid repeating winter 2022-23 blackouts across the country due to cold temperatures that led to strains on its electrical and gas grids. Looking ahead, Uzbekistan’s domestic consumption of natural gas is expected to rise over 40% between 2020 to 2030.

In November 2022, Russia initially proposed a ‘gas union’ with its Central Asian neighbors, a proposal that was roundly dismissed by Uzbekistan, Kazakhstan, and later Turkmenistan. While the ambiguous gas union looks no closer to existence one year later, domestic unrest from gas shortages and abrupt, drastic cuts to natural gas exports, have dampened the three Central Asian states’ earlier opposition to deeper energy cooperation. Beyond Moscow’s natural interest in expanding gas exports, Russian officials hope that strengthening gas ties with Central Asia could help integrate its pipeline infrastructure with regional networks and existing Central Asia–China export routes. This could allow Russia to export pipeline gas to China via Central Asia, likely at a lower cost than the proposed Power of Siberia 2 pipeline from Russia to China, to which the two sides have yet to commit.

Paul Saunders is President at Energy Innovation Reform Project.

Alex Stickney is Program Manager at Energy Innovation Reform Project.