The US decision to sanction Russia’s two largest oil conglomerates risks disrupting the vital energy lifeline connecting Russia to its biggest customers in Asia, but is unlikely to cause an immediate supply shock.
On October 22, the US Treasury Department imposed sanctions on Rosneft and Lukoil, stating that the measures are aimed at weakening Russia’s budget revenues and signaling that more actions could follow.
The US government has set November 21 as the deadline to terminate related activities, meaning businesses have nearly a month to complete or cancel existing agreements with Rosneft and Lukoil.
Bob McNally, President of Rapidan Energy Group, said this appears designed to avoid immediate chaos in the oil market while pressuring Russia.Rosneft and Lukoil together account for about half of Russia’s total exports of more than 4 million barrels of crude oil per day, a volume that has found a stable foothold in Asian markets since the West imposed a $60-per-barrel price cap in late 2022.
China imported around 2 million barrels per day from Russia in September, while India imported about 1.6 million barrels per day.“This is potentially a very significant escalation… President Trump’s sanctions on Rosneft and Lukoil will have substantial impacts on Russia’s seaborne crude oil exports, likely forcing major customers to scale back purchases in the coming period,” said Muyu Xu, senior crude analyst at commodity data analytics firm Kpler.
According to Kpler data, the sanctions are expected to affect several refineries in India directly linked to Russian supply. India’s state-owned refiners—Indian Oil, Bharat Petroleum, Hindustan Petroleum—as well as private conglomerates like Reliance Industries, HPCL-Mittal Energy, and Oil and Natural Gas are among the hardest hit.
Meanwhile, India’s state-owned refiners are reviewing records of Russian oil transactions to ensure no supplies come directly from Rosneft or Lukoil following the US announcement.“India may have to abandon seaborne oil transport deals, while China’s pipeline flows could continue,” said Emma Li, oil market analyst at Vortexa.
Energy experts say Chinese refiners will also need to exercise caution with shipments involving Rosneft and Lukoil.
According to Vortexa, China National Petroleum Corporation (CNPC) has pipeline supply agreements with Rosneft but no long-term contracts for seaborne crude.“I don’t think Russian crude flows will be completely blocked, but a short-term and immediate pause seems unavoidable,” Muyu Xu commented.
The sanctions mean buyers will need to find new ways to transport and pay for those shipments, which will increase costs and complexity—and that is precisely what the US wants: to reduce Russia’s profits without fully halting exports.
Energy experts note that China and India will have little choice but to rely mainly on supplies from the US and OPEC. “OPEC currently has spare capacity, particularly Saudi Arabia. However, increased demand for unaffected global supply will push oil prices up,” said John Kilduff, partner at Again Capital.
Vanda Insights founder Vandana Hari also said the alternative for China and India is Middle Eastern crude.These new measures differ significantly from the previous G7 price cap mechanism. “This seems to imply that we cannot buy Russian crude at any price. It’s a blanket ban… But the much bigger question is whether the sanctions will hold,” Kilduff said.
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