PetroSA’s plan to revive its Mossel Bay refinery is in a precarious position after a decision by the US to sanction Russia’s Gazprombank, whose division is the project’s financier.
The state-owned oil and gas company last year picked Gazprombank Africa as a partner for its gas-to-liquid refinery, built to produce synthetic petrol from gas and gas condensate, saying at the time legal opinion had informed it such a deal would not fall foul of sanctions.
However, the US at the end of last week said it had imposed sanctions on Gazprombank as part of its efforts to undermine Russia’s war efforts against Ukraine.
“Today’s sanctions targeting Russia’s largest remaining non-designated bank, as well as dozens of other financial institutions and officials in Russia, will further diminish and degrade Russia’s war machine.
“This sweeping action will make it harder for the Kremlin to evade US sanctions and fund and equip its military,” said secretary of the treasury Janet Yellen. “We will continue to take decisive steps against any financial channels Russia uses to support its illegal and unprovoked war in Ukraine.”
The US said the Kremlin was using Gazprombank as a conduit to purchase military materiel for its war effort against Ukraine.
“The Russian government also uses Gazprombank to pay its soldiers, including for combat bonuses, and to compensate the families of Russian soldiers killed fighting Putin’s brutal war against Ukraine,” she said.
The US treasury identified six wholly owned subsidiaries of Gazprombank, including SA-based GPB Africa and Middle East, as subject to the sanctions. The sanctions by the US open up PetroSA to secondary sanctions.
The Mossel Bay plant was capable of processing up to 45,000 barrels a day before its closure in 2020 because of depleted offshore gas reserves.
SA’s refining capacity has dwindled over the years, with only three refineries in operation. The largest refinery, Sapref, in Durban, has not been operational since 2022 due to flood damage. Its joint owners, BP and Shell, have since sold the plant, which was contributing 35% of SA’s refinery capacity, to the Central Energy Fund.
Max Meizlish, a senior research analyst for the Center on Economic and Financial Power at the Foundation for Defense of Democracies, said the US should more aggressively target Russia’s economy by prohibiting all dealings with Russian financial institutions, including their foreign subsidiaries.
“At the same time, Washington should provide only limited authorisation for dealings related to certain energy-related transactions that are strategically significant to the US and its allies,” Meizlish said.
“Absent a prohibition, the US should continue to designate foreign subsidiaries and representative offices of sanctioned Russian financial institutions and make clear to third countries the consequences of authorising their operation.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.