US Sanctions on Russian Oil Companies: Impact on Global Markets and India's Energy Security

Oil and gas represent Russia's primary export commodities.

US President Donald Trump has imposed "tremendous" new sanctions targeting Russia's two largest oil companies in an effort to pressure President Vladimir Putin to end the Ukraine conflict. These sanctions specifically target Rosneft and Lukoil, Russia's two biggest oil corporations that finance the Kremlin's "war machine," according to US Treasury Secretary Scott Bessent.

"Given President Putin's refusal to end this senseless war, Treasury is sanctioning Russia's two largest oil companies that fund the Kremlin's war machine," Bessent stated in an official release.

The US sanctions follow Britain's similar actions against Rosneft and Lukoil just a week earlier. In a parallel move, European Union countries approved their 19th sanctions package against Russia, which includes prohibiting Russian LNG imports. The United States has also urged Japan, another significant buyer of Russian LNG, to cease its energy imports from Russia.

The United States indicated its readiness to take additional measures against Russia while calling on Moscow to immediately agree to a ceasefire in Ukraine. President Trump has thus far avoided imposing sanctions on Russia over the war, focusing instead on trade measures.

The newly implemented sanctions will likely impact Russia's economy significantly, as taxes from oil and gas industries constitute approximately one-quarter of Moscow's federal budget. However, these effects could extend well beyond Russian borders, influencing Moscow's global crude trade as Washington increases pressure on countries to reduce Russian energy supplies.

Oil and gas reportedly serve as Russia's most valuable exports, with China and India standing as its primary customers. Together, Beijing and New Delhi account for the majority of Moscow's energy export market.

Last year, China purchased a record of over 100 million tonnes of Russian crude oil, representing nearly 20 percent of Beijing's total energy imports.

Similarly, India has emerged as the largest buyer of discounted seaborne Russian crude following Moscow's 2022 invasion of Ukraine, importing approximately 1.7 million barrels daily during the first nine months of this year. Trump has responded by imposing a 25 percent punitive tariff on Indian goods in retaliation for these imports.

However, Trump has claimed that Prime Minister Narendra Modi assured him that Delhi "was not going to buy much oil from Russia" as Modi also "wants to see the war end with Russia-Ukraine." New Delhi has consistently maintained that its priority remains protecting Indian consumers' interests within a volatile energy landscape.

Edward Fishman, a former senior State Department sanctions official, noted that the impact of these new US sanctions depends largely on subsequent actions.

"How big depends on follow-through: will the US actively threaten secondary sanctions on the Chinese banks, UAE traders, and Indian refineries that transact with Rosneft/Lukoil?" he wrote on social media platform X.

"I expect, at the very least, some pullback from dealings with Russian oil in the short term. Whether this marks a long-term, strategic squeeze on Russia's oil revenues -- the lifeblood of Putin's economy -- will depend on the US commitment to active, ongoing enforcement," Fishman added.

Meanwhile, according to Reuters sources, Indian state refiners have begun reviewing their Russian oil trade documentation to ensure no direct supplies would come from Rosneft and Lukoil following the US sanctions.

Reports indicate that state refiners, including Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp, and Mangalore Refinery and Petrochemicals, are examining bill of lading documents for Russian crude arriving after the sanctions to verify it is not sourced directly from Rosneft or Lukoil.

The companies have not issued any official statements regarding this matter. According to trade sources, Indian state refiners rarely purchase Russian oil directly from Rosneft and Lukoil, typically conducting transactions through intermediaries.

Russia responded by stating that the new US sanctions on its oil industry risk undermining diplomatic efforts to end the Ukraine conflict, claiming it has developed a "strong immunity" to such measures.

"We view this step as being entirely counterproductive, including in terms of signalling the need to achieve meaningful negotiated solutions to the Ukrainian conflict," Russian foreign ministry spokeswoman Maria Zakharova told a weekly briefing.

"Our country has developed a strong immunity to Western restrictions and will continue to confidently develop its economic potential, including its energy potential," she concluded.