The US sanctions placed on Russia’s largest oil companies are the most severe measure yet against the country’s economy and mark the first time the Trump administration has imposed direct costs on Moscow.
Donald Trump says he hopes his “tremendous” sanctions can be lifted soon as the war will be settled. But will they bring Russia to the table and how high will the oil price go in the meantime?
Who are the biggest buyers of Russian crude?
Russia exports about 5mn barrels of crude oil per day, the vast majority of which is sent to India and China. India takes about 1.5mn barrels, and China another 2.2mn barrels.
India imported only a small amount of Russian crude before Russia’s full-scale invasion of Ukraine in February 2022, but that changed in late 2022 when other buyers started to shun Moscow’s barrels, as G7 members imposed price caps and other restrictions.
The move created a windfall for Indian refiners, who snapped up barrels of discounted Russian crude before processing it into gasoline and diesel and selling it internationally at full market prices.
Other buyers of Russian crude include Turkey, which takes about 400,000 barrels per day, while smaller amounts are also sent to Belarus and a few other countries.
The two newly sanctioned entities — majority-state-owned Rosneft and privately held Lukoil — are Russia’s largest oil producers and account for about half of its total crude exports, according to SEB analyst Ole R Hvalbye.
How do the sanctions work?
US sanctions have a long reach. By threatening to impose so-called “secondary sanctions” on any financial institution dealing with the sanctioned entities, the US is forcing companies that buy Russian oil to make a choice: do you want to retain access to US capital markets, or do you want to trade with these Russian companies?
For many international companies, the choice is straightforward, as the risk of losing access to dollar funding and the wider western financial system is too great.
That means US sanctions, in effect, act as a blacklist — assuming the Trump administration decides to strictly enforce them.
Russia has had some success in circumventing the earlier G7 price cap, which was designed to keep Moscow’s oil in the market — but at a discounted rate — to stop global prices spiking.
But it still imposed a financial penalty on Moscow, with lower earnings for Russian oil companies feeding through into lower taxes for the government. The latest sanctions are an attempt to supercharge this effect.
What might buyers of Russian oil do in response to the US sanctions?
Buyers of Russian oil must decide quickly how to respond.
For refiners with global operations, losing access to US capital markets could be catastrophic, even if the Indian and Chinese governments want to avoid the perception that they are being pushed around by Washington.
Reliance Industries, one of India’s largest multinationals and owner of the world’s biggest refinery, has already said it would “recalibrate” its approach to Russian oil.
Helima Croft at RBC Capital Markets said secondary sanctions “would force refiners that rely on access to US capital markets to seek alternative sources of supply”.
There is the added risk for oil companies of being barred from western insurance and shipping markets. While Russia has built up its own shadow fleet of vessels since 2022, companies would still suffer if their wider operations were denied access to western markets.
Historically, India has been less willing to buy US-sanctioned barrels from countries such as Iran than China. The Nayara refinery in India, which is backed by Rosneft and already sanctioned by the UK and EU, will probably face further pressure.
The biggest question mark is over the behaviour of Chinese companies, including independent and state-backed refiners that may hope they are better positioned to ignore US threats.
China buys some Russian oil directly via a pipeline under long-term supply agreements, whose volumes are harder to track than shipments moving by sea.
Jorge León at Rystad said China would probably keep buying Russian oil, though this would not be enough to offset the expected decline in Indian purchases.
“There is a certain limit to how much China can absorb,” León said. “So it looks like we might start seeing some production shut-ins from Russia.”
Will it bring Russia to the table?
How Russia responds diplomatically remains to be seen.
Oil and gas revenues make about a quarter of Russia’s federal budget, according to the country’s finance ministry, so any significant decline in exports and revenues would hit Moscow’s war chest substantially.
But Russian President Vladimir Putin has shown a willingness to weather significant pressure, and he is unlikely to concede to any settlement that looks like a loss of face.
He has also weaponised energy supplies in the past, triggering the energy crisis that accompanied Russia’s full-scale invasion by squeezing natural gas supplies to Europe.
The sanctions come at a time of “heightened vulnerability for the Russian budget”, said Benjamin Hilgenstock, the head of macroeconomic research and strategy at Kyiv School of Economics Institute.
Russia’s energy revenues, which come mainly from oil, have already dropped 20 per cent year on year in the first nine months of 2025, finance ministry data shows.
However, Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center, said not to bet on Putin moving to make a quick deal, arguing his “goals stretch far beyond economic logic”.
What do the sanctions mean for the oil price?
Brent crude has already risen 9 per cent from its low of $60 at the start of the week, signalling widespread concern over the impact of the sanctions.
While rising oil prices will probably be unwelcome for Trump, who has vowed to drive down inflation, they are starting from a low base, having declined since Russia’s invasion sent crude well above $100 a barrel.
Amrita Sen, founder of Energy Aspects, said she expected the price to go above $70 a barrel.
“The market is trying to work out the real impact, but if disruption, even if temporary, is over 2mn barrels per day, there will be upward pressure on prices,” she added.
For now, the market is relatively well supplied. Saudi Arabia has led Opec+ in boosting output in recent months as they attempt to rebuild market share. Prices slumped 10 per cent during the first three weeks of October.
Michael Haigh, head of commodities research at Société Générale, said there was still a huge amount of uncertainty, including over how much Russian production might decline or whether it can find alternative buyers if India turns away.
“We don’t know how this is going to play out,” Haigh said. “The market seems to be saying, ‘Buy it now, ask questions later.’”
Additional reporting by Andres Schipani in New Delhi
