New Sanctions.
October 24, 2025
On October 22, frustrated by Vladimir Putin’s refusal to soften his negotiating stance on ending the war in Ukraine, the United States imposed sanctions on Russian oil giants Lukoil and Rosneft. Judging by official statements and coverage in major American and European newspapers, one might assume that US experts have discovered a magic formula to increase sanctions pressure on Russia and force the Kremlin to change its position. However, I remain skeptical. As always, the devil is in the details.
The inclusion of these Russian companies on the Specially Designated Nationals (SDN) list means their assets within US jurisdiction must be frozen, and US residents are prohibited from transacting with them or their securities. These sanctions are scheduled to take effect on November 21.
Freezing the assets of these two companies is unlikely to have much impact; their liquid assets have most likely already been moved to “safe havens,” and any loss of access to real estate will not significantly affect the Russian economy.
Lukoil and Rosneft are, in fact, the two largest Russian oil companies, responsible for half of Russia’s oil production and roughly the same proportion of oil and oil product exports. If US sanctions succeed in preventing these companies’ oil from reaching the global market, the Russian economy and budget would suffer a serious blow. The critical unanswered questions are whether this will actually occur and what the impact on global oil prices will be.
First, it is important to note that since March 2022, the US has banned its residents from purchasing Russian oil, so these new sanctions will not affect direct exports to the US. Seventy-five to eighty percent of Russian oil exports go to China and India, with another 7 to 10 percent sold to Turkish companies. Accordingly, the new sanctions include a clause that allows secondary sanctions against companies in third countries that continue to buy Russian oil. Whether these secondary sanctions will be enforced remains uncertain. What is clear is that previous US actions—such as imposing prohibitive import duties on goods from India—did not reduce Indian companies’ purchases of Russian oil, nor did threatened duties against China materialize.
Secondary sanctions would mean targeted companies are excluded from dollar settlements, lose access to the US financial market, and are barred from doing business with US companies. For companies in China, India, and Turkey that buy Russian oil and petroleum products, being added to the SDN list would be a significant blow. These companies would likely need to reconsider their business strategies to avoid such risks. What options are available to them?
First, they could try to find alternative oil suppliers. However, given the current state of the global market, this seems unlikely. Lukoil and Rosneft account for 3.6–3.8 million barrels per day of exports—an amount that exceeds the combined spare production capacity of Saudi Arabia, Kuwait, and the UAE by 15–20%. Moreover, it is uncertain how quickly these countries could increase output and establish new supply contracts.
Secondly, while US sanctions prohibit purchasing oil directly from Lukoil and Rosneft, if several intermediaries registered in different jurisdictions stand between them and end consumers, the purchase may no longer violate US sanctions. A similar workaround is used in reverse, where goods prohibited for sale to Russia are routed through intermediaries to sanctioned Russian buyers. However, such intermediaries are usually short-lived; by the time US authorities uncover them, the transactions have already taken place.
Thirdly, with the support of the Russian authorities, Lukoil and Rosneft could transfer their export contracts to Russian companies not included on the SDN list, in exchange for domestic sales contracts and appropriate compensation.
What is the likely outcome? It would be premature to make either optimistic or catastrophic predictions. The initial market response—a spike in prices and reports that Indian and Chinese companies are reassessing their options—was entirely predictable. The sanctions will take effect on November 21. If global oil prices are rising by then, it will suggest that the sanctions have limited Russian oil exports. If not, the new US measures will likely remain a symbolic gesture.
Additionally, Lukoil owns refineries in Bulgaria and Romania. Since these facilities do not process Russian oil, the sanctions are unlikely to impact the Russian economy in this regard. However, the governments of Bulgaria and Romania will need to decide whether to restrict Lukoil’s ability to manage its assets.
One final point: if US sanctions truly succeed in blocking half of Russia’s oil exports, the global economy should brace for a significant price increase. There is hope that Persian Gulf producers could offset the shortfall, but just before the sanctions were announced, it was revealed that Saudi Crown Prince Mohammed bin Salman would meet President Trump in Washington on November 18—three days before the sanctions take effect. Apparently, this issue was not discussed with him in advance.