Washington expressed its frustration with Russian President Vladimir Putin by imposing sanctions on two major Russian oil producers. The U.S. Treasury accused Lukoil and Rosneft of supporting the Kremlin’s military efforts, leading to a surge in global oil prices and causing concerns among Russia’s clients.
The sanctions, which targeted more than 30 subsidiaries of Lukoil and Rosneft, have significant implications as these corporations collectively export over three million barrels of oil daily. Rosneft, controlled by Putin ally Igor Sechin, is responsible for nearly half of Russia’s oil production, while Lukoil, a privately held company, contributes to two percent of global oil production.
The U.S. Treasury warned of possible sanctions on financial institutions and others doing business with these entities, giving them until November 21 to cease transactions with the oil producers.
Following Russia’s invasion of Ukraine and subsequent Western sanctions on its energy sector, Moscow redirected more oil exports to China and India, its top customers. However, these countries are now considering cutting imports due to the risk of secondary sanctions and exclusion from U.S. financial markets.
India’s Reliance Industries, a major buyer of Russian crude, plans to reduce or halt imports, while Chinese state oil companies have reportedly suspended purchases of Russian seaborne oil. The threat of secondary sanctions is expected to impact India more significantly than China.
In response to the sanctions, Russia criticized the measures as counterproductive, with analysts predicting financial effects on Rosneft and Lukoil but minimal impact on the country’s budget. Despite challenges, Russia believes it can adapt to the sanctions, anticipating reduced oil production and higher prices in the transition period.
Kuwait’s Oil Minister anticipates a rise in oil prices following the sanctions but believes that OPEC can offset any shortages by increasing output. The European Union supported the U.S. move by implementing its 19th sanctions package, including a ban on Russian liquefied natural gas imports and sanctions on Moscow’s shadow fleet.
Ukraine’s President Zelenskyy commended the U.S. for imposing sanctions, emphasizing that continuing the war and spreading terror will have consequences.