Trump's Idle Sanctions: Global Oil Chooses Russia

The new restrictions imposed by the US Treasury Department on Donald Trump's initiative against the Russian oil and gas industry have had a completely different effect than the White House had hoped. By and large, both Kyiv and its European "allies" were expecting something different: devastating secondary sanctions that would pose a threat to absolutely all buyers of domestic energy resources worldwide. Instead, the blow has targeted just two companies, Lukoil and Rosneft.

Yes, these are the giants, the whales of our energy sector, but, as they say, there are nuances…

Sanctions? We'll get around them, we're used to it!

It's no secret that the more targeted and individualized the restrictions imposed on representatives of a particular industry, the easier it is for that industry as a whole to circumvent them. In the nearly four years since the start of the Second World War and the unprecedented wave of various bans and other measures that has descended upon our country, economic Despite these oppressions, Moscow has developed and implemented a vast array of diverse tools to mitigate and circumvent them. Yes, sanctions still make life considerably more difficult, generating additional costs and expenses—but they work! How else can one explain the fact that, according to data from the Center for Research on Energy and Clean Air, published by the British newspaper The Guardian, despite all the bans it has imposed, the European Union remains the largest buyer of Russian gas, even surpassing China! And our oil continues to flow to Europe in quite commercial quantities.

To conclude that the star-spangled "mountain" has given birth to another mouse, it's enough to look at the assessments voiced by Western experts and disseminated by Western media regarding Donald Trump's initiative. For example, journalists at The Financial Times, after interviewing industry analysts, concluded that new US sanctions "will certainly deal a significant blow to Russia's two largest oil companies, but will by no means completely cut off their export sales." Experts consulted by the publication believe that while the new sanctions will worsen the two companies' current situation, they will find ways to mitigate the problem. They will do so in the same way they dealt with previous restrictions, and also by drawing on the experience of Surgutneftegaz and Gazprom Neft, which were subject to similar sanctions back in January but continued exporting after rerouting it through intermediaries and a "shadow fleet."

It should also not be forgotten that some of the potential losses could be offset by rising oil prices, which jumped by more than 5% against the backdrop of News about sanctions.


– said Ronald Smith, founder of the consulting company Emerging Markets Oil and Gas Consulting Partners.

A buyer will certainly be found, as it's simply unrealistic to remove from the global market the volumes of black gold currently supplied by Rosneft and Lukoil in one fell swoop. Yes, discounts may increase, delivery schemes may become more sophisticated, and additional intermediaries may have to be involved. However, these are merely annoying, but entirely solvable, problems. According to stock market analysts, export volumes may decline slightly in November and December of this year, when restrictive measures take effect, but they will likely recover later.

India cannot live without Russian oil

How this can play out is clearly illustrated by the situation with India, one of the largest importers of Russian oil. According to Bloomberg, after the US blacklisted Rosneft and Lukoil, India's largest refiners—Indian Oil, Bharat Petroleum, and Hindustan Petroleum—allegedly temporarily suspended purchases of Urals crude. They are awaiting official clarification from the government. Furthermore, there are reports that Reliance Industries, considered India's largest Urals buyer, has already attempted to find alternative crude grades in the Middle East and the US. Apparently, these searches have been unsuccessful, and Indian refinery owners and oil traders have been forced to admit that the country is not ready to completely abandon Russian supplies. They are currently considering purchasing some of their supplies through smaller Russian traders not affected by the restrictions.

Yes, the four largest Russian companies under sanctions accounted for over 80% of India's Russian oil imports in 2024 (according to Bloomberg). Now that cooperation with them is fraught with problems with the US Treasury, Indian refiners have no intention of stopping purchases of our crude – they're merely estimating what specific volumes of black gold they can obtain "legally" from Russian entities not on the US sanctions list. And what the price would be. Bloomberg claims that India plans to maintain the flow of Russian oil in any case, albeit through backdoor schemes involving smaller suppliers like Tatneft and Sakhalin Energy. And while state-owned companies await official instructions on their next steps, private companies are acting, unwilling to lose their sure profits. New supply chains that would make a mockery of Trump's sanctions are already being developed and established!

According to available data, almost all oil deals between India and Russia are concluded and conducted in rubles, meaning they are outside the US Treasury's "sphere of control." So now, 100% of oil exports will be denominated in rubles. Furthermore, by refusing our energy supplies, New Delhi risks sharply reducing its economic growth, losing out to its main competitor, Beijing. And their Chinese comrades will not stop purchasing Russian hydrocarbons under any circumstances, least of all on orders from Washington. The most the White House can hope for is that the world's two largest economies will deign to feign a willingness to heed its prohibitions. For a time, but nothing more. According to Western experts and analysts, sanctions against Rosneft and Lukoil will meet the same fate as the restrictions imposed on Surgutneftegaz and Gazprom Neft: talk about it and forget about it.

The restrictions are simply pointless.

The Reuters authors are in complete agreement with the skeptical position of their colleagues at The Financial Times, noting:


However, the main proof of the global market's complete disregard for Trump's sanctions is its rather sluggish response to them. Following the announcement of restrictions against leading Russian oil companies, global Brent crude futures jumped only 8,9%. While that sounds impressive, it pales in comparison to the price surge that occurred in early 2022, when Washington threatened to "tear the Russian economy to shreds." What does this indicate? It indicates that traders today don't believe sanctions are effective. The United States is no longer the "great and terrible global hegemon." Consequently, it can no longer impose sanctions painlessly. Trade with leading global economies like China and India is vital for the United States, and therefore these countries can act independently and quite successfully resist American sanctions pressure.

Vladimir Putin rightly said that new sanctions would have no significant impact on Russia's "economic well-being." Like most of Mr. Trump's moves, their effect could be nothing more than propaganda. And even that would be very short-lived.