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US sanctions imposed on 22 October tighten the squeeze on Russian oil, but their ripple effects on global markets raise deeper questions about enforceability and impact
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Following the introduction of secondary tariffs and sanctions on countries purchasing Russian energy in August 2025, the United States (US) Treasury, citing Moscow’s lack of serious interest in the peace process, imposed additional sanctions against two major oil companies, Rosneft and Lukoil. The rationale behind these restrictions is aimed at curtailing Russia’s access to export markets, impacting its ability to finance the war, and nudging the latter towards negotiations with Ukraine. Even though these sanctions have ripple effects on global energy markets, they do little to influence the trajectory of Russia’s war in Ukraine.
India and China, the largest buyers of Russian oil, have opposed the unilateral imposition of economic sanctions on Russia, citing that the restrictions do not bear the mandate of the United Nations (UN). Interestingly, both Indian and Chinese firms have begun to reduce their purchases of Russian oil. However, with a majority of Russian oil under sanctions, the likelihood of cutting off Russian oil supply from the global energy markets in the short to medium term remains an unlikely scenario, as the cost of decoupling or in simpler terms, ‘ripping off the band-aid’, would impact the international political economy and have long-term impacts for the global oil markets.
The recent US sanctions are an indicator of Washington’s shifting position, and are the first introduced under the current administration. Since the war began, sanctions on Russian oil have been sparingly imposed, fearing destabilising impacts on global energy markets and high inflation domestically in the US. However, this position changed early this year. The outgoing US President, Joseph Biden, imposed sanctions on Russian oil companies Gazprom Neft and Surgutneftgaz, among other notable restrictions, including sanctions on 183 vessels facilitating the transit of Russian oil below the US$60 per barrel price cap.
A change of guard at the White House saw a further shift in policy. President Donald Trump initially adopted a conciliatory position vis-à-vis Moscow; however, after observing a lack of resolve on Russia’s part in ending its war in Ukraine, Trump imposed secondary tariffs on India for purchasing Russian oil, still refraining from imposing sanctions on Russia in August. The tariffs did not deter importers from buying Russian oil. Thus, in October, Trump upped the ante by sanctioning major Russian oil firms.
Non-Russian firms involved in the midstream and downstream production of Russian oil have become increasingly risk-averse, fearing inclusion in the SDN (Specially Designated Nationals) list.
With nearly two-thirds of Russian oil firms under US sanctions, non-Russian firms involved in the midstream and downstream production of Russian oil have become increasingly risk-averse, fearing inclusion in the SDN (Specially Designated Nationals) list. The further toughening of the US’s stance was evident in the US Treasury blocking the sale of Lukoil’s assets abroad to Gunvor, a major commodities trading firm headquartered in Switzerland. The backing out of Gunvor leaves Lukoil’s assets across Europe in limbo. Experts state that Lukoil’s inability to reach an agreement with the buyers on its European subsidiaries could lead to them being nationalised by respective governments.
Since 22 October 2025, the price of oil has increased by US$5 per barrel. The markets remained stable because of the moratorium period, set to expire on 21 November 2025. Meanwhile, countries began scaling down purchases of Russian crude, causing Russian oil prices to fall. Conversely, the price of non-sanctioned grades of crude began to increase due to the growing demand. However, there isn’t enough oil to replace Russian crude in the global oil markets. Russian grades of crude constitute 10 percent of the global oil market. Moscow exports more than 4 million barrels of oil per day and 1.5 million barrels of oil products; it would be nearly impossible to replace Russian oil in the short term. Thus, just like in the aftermath of the 10 January sanctions, sanctioned oil will likely be sold at discounted prices through third-party oil traders. However, these recalibrations have had implications for the Russian economy. With more than a third of its export revenue generated from the sale of crude oil, the decline in exports will likely result in the Russian Central Bank imposing additional currency controls to curb inflation. Grappling with a high interest rate, the country’s economic activity is expected to slow down, impacting both consumers and industry.
Table 1.1: Trajectory of India’s crude oil imports from Russia since March 2022
*For 2022 and 2023, the discount range is inclusive of both DAP (delivered at place) and FOB (Free on Board) prices.
** November data, not averages.
Source: Author’s collection of data from Kpler, the Russian Ministry of Economic Development, and interviews with industry experts. (note: the data points may vary)
Unlike secondary tariffs or sanctions imposed by the European Union (EU), US sanctions come with the threat of being cut off from the dollar-backed financial system. This is why, following the announcement of the 10 January sanctions, refiners scaled back their purchases of Russian oil in February and March (see table 1.1). Countries continued to buy Russian oil through oil traders, and later began buying oil directly from Russia, as the enforcement of sanctions weakened under the Trump administration. Similar trends can be observed following the imposition of the recent sanctions.
Chinese state-owned oil firms Sinopec and PetroChina have suspended some of their future crude exports from Russia. Similarly, Indian refiners have paused orders for Russian oil in December. These firms account for 65 percent of Russian oil imported by India. Despite scaling down purchases, neither country has officially commented on complying with the recent set of sanctions. Indian officials, alongside reiterating the country’s position on US sanctions, stated that market forces drive oil purchases and that, given India’s price-sensitive market, discounts on crude oil influence the volume of India’s purchases. The rising discounts for Russian crude since 2022 led to India purchasing significant volumes of Russian oil (see Table 1.1), making it the second-largest importer of Russian oil.
In the medium to long term, Russian crude is likely to be imported via traders and middlemen, and this trend is expected to further increase when Trump’s attention shifts.
In the short term, Indian oil importers would likely scale back on purchasing Russian oil. Indian refiners will buy other grades of crude from other countries. However, in the medium to long term, Russian crude is likely to be imported via traders and middlemen, and this trend is expected to further increase when Trump’s attention shifts. Even if Trump’s logic of increasing the sale of American grades of crude is considered, there is not enough American oil in the short term to offset the demand. Moreover, the US itself imports a substantial volume of oil for its domestic consumption.
Furthermore, discounted crude is a welcome for India, and has had a positive impact on the Indian economy. Experts estimate that, since 2022, the discounts have resulted in profits of US$12-17 billion, along with an increase in tax revenue. Oil prices domestically remained stable; meanwhile, the global commodity prices, especially in Europe, soared. With the falling discounts since 2024, Indian refiners began to look for new markets for sourcing crude oil. However, with the surging discounts after the introduction of sanctions in January, and later, with the introduction of secondary tariffs in August, Indian refiners increased their purchases of Russian oil. So far, sanctions have not had a radical impact on India’s crude oil purchases from Russia. Now, if Indian refiners were to fully pivot from Russian oil, the re-orientation of India’s oil procurement would result in cross-sectoral implications for the Indian economy. The surging inflation and the depreciation of the rupee will cause fiscal strain.
With existing sanctions packages on three oil-producing nations-Russia, Iran, and Venezuela- the global oil market is increasingly becoming bifurcated. More than 15-20 percent of global oil is under sanctions. Interestingly, while these sanctions have had an impact on their respective economies, they have seldom attained their intended goals. Instead, they have caused disruptions in the international political economy. With sanctions, the volatility increases in the global economy. Cost-push inflation persists, affecting economic growth.
If Indian refiners were to fully pivot from Russian oil, the re-orientation of India’s oil procurement would result in cross-sectoral implications for the Indian economy. The surging inflation and the depreciation of the rupee will cause fiscal strain.
However, the West’s growing reliance on sanctions, stemming from its inability to decisively alter the course of Russia’s war in Ukraine, has only intensified the scope and severity of these measures. While they may not have led to the falling of regimes, the pressing question remains: can Washington realistically enforce such sanctions on over two-thirds of the world’s nations that are not part of the sanctions regime against Russia, at the cost of debilitating economic effects?
Rajoli Siddharth Jayaprakash is a Junior Fellow at the Observer Research Foundation.
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Rajoli Siddharth Jayaprakash is a Junior Fellow with the ORF Strategic Studies programme, focusing on Russia’s foreign policy and economy, and India-Russia relations. Siddharth is a ...
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