Russia, sanctioned by the EU, the U.K. and U.S. for its invasion of Ukraine last year, will likely avoid having secondary sanctions imposed on it, Reed Smith partner Leigh T. Hansson told Hart Energy in an exclusive roundtable discussion in downtown Houston.

“It's just not something I think the U.S. wants to do,” Hansson said, referring to secondary sanctions and the negative impact they could have — potentially pushing U.S. gasoline prices above $4 per gallon.

“I absolutely don't see that happening since [the U.S.] wants to keep up the relationship they have with India in particular, and it's an absolute necessity to keep that product moving,” Hansson said during the roundtable discussion at Le Méridien Houston along with Eurasia Group’s managing director for energy, climate and resources Raad Alkadiri.

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Hansson said the West has stuck with the Russian price caps on oil and refined production, which has been a good negotiating point with China and India. But she added that fine-tuning of sanctions is possible, with changes likely to address weaknesses such as governments designating companies, and not just their controlling individuals, for penalties.

“I would think that if they're really trying to shut that down, that kind of activity, they're going to have to do more to designate the actual companies as opposed to just the individuals,” said Hansson, a partner in Reed Smith’s global regulatory ground and a leading lawyer in the consultancy’s international trade and national security team.

On the effectiveness of sanctions on Russia, Hansson acknowledged they haven’t dislodged Putin from power but have “pushed him off the centerstage and sort of alienated him in some respects.”

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“But I think in a number of respects, they've served a purpose by reducing the amount of funds flowing to Russia… and we've never really seen this kind of quick and robust reaction to the actions of a country like Russia before,” Hansson said.

The effectiveness of Venezuelan sanctions

In 2019, the U.S. hit Venezuela with sanctions that were aimed specifically at bringing the OPEC country’s oil sector to a complete halt and dislodging President Nicolas Maduro from power. Some five years later, Venezuela’s oil sector is still functioning, albeit at much lower production levels, and Maduro remains in charge. However, some 7 million Venezuelans have fled the ongoing political and economic uncertainties, creating financial stress for recipient countries like Colombia and others in Latin America.

Amid on-and-off again discussions between Venezuela’s ruling party and opposition factions with an eye on presidential elections in 2024, the future of the South American country remains uncertain.

In 2022, Washington softened its stance somewhat, taking steps to allow Chevron Corp. to participate more actively in the production and export of its oil produced in Venezuela. But the Biden administration remains on the fence in terms of its next sanction-related moves, many oil sector pundits say, as the government weighs in on efforts to achieve “free and fair” elections next year.

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Asked whether a complete lifting of sanctions on Venezuela’s oil sector would be an admission by the U.S. that its sanction policy in Venezuela was wrong, Hansson agreed.

“I think that probably would be an admission if they did a complete lifting of that,” Hansson said, likening it to the situation in Cuba, adding that a lifting of sanctions was unlikely to “happen because it's been entrenched for so many decades.”

Hansson said the U.S. government’s plans to get rid of the Maduro regime fairly quickly just didn’t happen according to plans, which has forced Washington to really think about its Venezuelan policy and what to do with the [Citgo Petroleum and other] assets which it continues to shield from creditors and Maduro’s government.

“The government really hasn't, I think, ‘jelled’ its policy on what it wants to do with those assets. Do they want to distribute them? Do they want to save them for the eventuality that they think is going to happen when [a] different regime [is] in power? So it's a very interesting situation,” Hansson said.

Iran sanctions is success?

While many academics and analysts argue the effectiveness of U.S. sanctions on Russia and the price caps and similarly about ineffectiveness of sanctions on Venezuela, U.S. sanctions on Iran have seemingly worked.

“I think Iran is a really good example of sanctions policies that have worked, and particularly when the U.S. was part of the JCPOA [Joint Comprehensive Plan of Action] and prior to that, when you had the EU and the U.K. also on board, that sort of alienating Iran, [and] really brought Iran to the negotiating table,” Hansson said.

Looking back to 2015 and 2016, when there was support to make Iran sort of more compliant, the U.S. still has the ability to inform about that policy, especially the use of dollars, which remain dominant in the global marketplace, she said.

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