The US government rocked energy markets when it announced sanctions on the two biggest crude producers oil her of Russia on October 22.
All eyes are now on how global oil supply and prices will react after the measures come into force from today (21.11.25). Russia’s exports – about 7.4 million barrels per day, according to the International Energy Agency – account for about 7% of global consumption of crude oil and refined fuels.
The latest sanctions on Rosneft and Lukoil, combined with sanctions imposed earlier this year, mean that the companies that transport most of Moscow’s oil to foreign markets are now blacklisted.
India and China are currently the two largest buyers of Russian crude oilaccording to Bloomberg.
As of October 24, 2025, nearly 3.6 million barrels per day were being supplied. After Washington announced the sanctions, Indian refiners said they would halt most of their purchases, although so far sales have only slowed, not stopped. If India follows the directive, Russia will struggle to find alternative buyers. It is unclear whether China is willing to buy more. Government buyers there have already canceled some purchases.
The measures may also not put enough immediate pressure on President Vladimir Putin to end his war in Ukraine.
However, a complete boycott of Russian oil by India and China will undoubtedly intensify competition for oil from other producing countries, pushing prices higher. Benchmark oil prices in the Middle East soared the day after the sanctions were announced, indicating higher demand for their crude.
1. What are the new penalties?
The US Treasury Department has sanctioned two Russian oil giants – Rosneft PJSC and Lukoil PJSC – as well as all entities in which they directly or indirectly hold a stake of 50% or more, for operating in Russia’s energy sector.
As a result, all US or US-based entities and individuals are prohibited from doing business with the sanctioned entities. Non-US companies may also be at risk of penalties if they are found to be doing business with Rosneft, Lukoil or their sanctioned subsidiaries. The transactions involving the two companies must be completed by November 21, the Finance Ministry said.
The previous US administration of Joe Biden had already targeted two Russian oil companies, Gazprom Neft PJSC and Surgutneftegas PJSC, in January. In a separate move on October 23, the European Union said it would ban trade with Rosneft and Russian energy giant Gazprom Neft.
Oil buyers and traders around the world may have no choice but to avoid sanctioned companies, as much of global trade depends on banking, trading and insurance services operated by the US and the EU.
2. Why were sanctions introduced?
The Treasury Department said the sanctions were a response to Putin’s refusal to end the war in Ukraine. The idea is to limit revenue from oil and gas taxes that account for about a quarter of Russia’s federal budget, draining the funds Putin needs to prolong the conflict.
US President Donald Trump has pledged to end the conflict within 24 hours of returning to office, but the situation has continued despite existing US sanctions against Russia. The latest measures are his government’s first direct sanctions on Russia’s oil sector, marking a shift in his approach.
3. What is the point of more penalties?
The US government had largely avoided direct sanctions against Russian oil companies in favor of an unusual price cap mechanism adopted under former President Joe Biden. The aim was to limit the Kremlin’s energy revenues while preventing a sharp drop in Russian oil supply that could trigger a global price shock.
The cap, introduced by the Group of Seven industrialized nations, the European Union and Australia in 2022, set a maximum price for Moscow oil at $60 a barrel and was followed by restrictions on refined fuel. Buyers who pay above these prices lose access to essential services such as shipping, insurance and financing provided by Western companies. Most European nations are also barred from importing Russian offshore oil under EU sanctions, regardless of price, although some crude still reaches Europe indirectly as refined products from countries that process Russian oil.
Western nations also targeted entities in third countries involved in the Russian crude oil trade. Through sanctions, they have punished hundreds of tankers and their owners and operators. A number of foreign buyers and operators in the trade were blacklisted, including India’s Nayara Energy Ltd. – partly owned by Rosneft – and Chinese refiner Shandong Yulong.
However, while Russian oil exports often slow in the first weeks after sanctions are imposed, they usually recover as logistics providers adjust. A “shadow fleet” of mostly older tankers transports Russian crude oil, supported by parallel banking and port infrastructure.
The companies have been pumping Russian crude oil by sea at a total rate of 2.8 million barrels per day. China also receives about 800,000 barrels per day via pipelines. Russian crude oil shipments by sea have returned to near levels last seen more than two years ago.
As oil prices have fallen in recent months, the EU and UK have lowered the price ceiling on Russian oil. But the US has not, and Trump’s team has never used the cap as a means of imposing follow-on sanctions.
4. How will the new sanctions affect Russia?
Already, there are signs that the measures are having an impact. Russian crude oil shipments by sea have fallen, exacerbating the country’s slump in oil prices and shrinking revenues for the Kremlin to a two-and-a-half-year low of about $1.2 billion a week.
The latest move raises the possibility that anyone in the Russian supply chain could handle barrels from a sanctioned entity. While Russian officials are not ignoring the latest sanctions, they have expressed confidence that the country will find ways to mitigate the impact. Much will depend on whether initial forecasts by Indian refiners prove accurate – that they will drastically reduce imports – and whether other countries are too wary of sanctions to step in as alternative buyers.
5. How will these sanctions affect India?
India has already reduced purchases of Russian crude for December arrival. Most of the country’s refineries have also said they will no longer receive Russian crude after the recession ends. The remaining companies will likely consider purchasing from unsanctioned sellers.
The Trump administration had imposed punitive tariffs on India on its Russian purchases. Lower imports could help a trade deal ease those tariffs.
Reliance Industries Ltd., meanwhile, said it will stop processing Russian oil at part of its giant Jamnagar oil refinery. The refinery’s export-focused division, which accounts for about half of its capacity at 1.4 million barrels per day, received its last shipment of Russian crude oil on Nov. 20, the company said in a statement.
6. What will China do?
It is unclear how the world’s largest oil-buying nation and the biggest buyer of Russian oil will react to the new US sanctions.
China has so far been spared Trump’s threats of secondary tariffs on Russian crude purchases, unlike India. Beijing appears emboldened by its success in defusing a trade war with Washington, during which Trump briefly imposed 145 percent tariffs on Chinese goods.
But while ties between Beijing and Moscow are close, it is unclear whether China will want to take on additional Russian oil supplies rejected by India. The country’s economy is slowing, its crude oil reserves are already high, and supply diversification is a long-standing priority.
Most of the Russian oil destined for India arrives by sea. It could be difficult to divert this shipment to China if international traders, shipping companies and banks refuse to participate in the trade for fear of being caught in the new sanctions.
One option could be to use the same “dark fleet” that shadow banking networks and port infrastructure traders have used to move sanctioned Iranian crude to private Chinese refiners, this time to buy Russian crude and oil products shipped by sea.