The sanctions target oil giants Rosneft and Lukoil, which between them account for more than 5% of global oil output
In another bid to starve Moscow of revenue, the EU also approved a 19th package of sanctions that includes a ban on Russian liquefied natural gas imports
MOSCOW: U.S. President Donald Trump hit Russia’s two biggest oil companies with sanctions in a sharp policy shift on Moscow’s war in Ukraine, prompting global oil prices to rise by nearly 5% on Thursday and India to consider cutting Russian imports.
The sanctions target oil giants Rosneft and Lukoil, which between them account for more than 5% of global oil output, and mark a dramatic U-turn by Trump, who said only last week that he and Russian President Vladimir Putin would soon hold a summit in Budapest to try to end the war in Ukraine.
Indian refiner Nayara Energy, whose biggest shareholder is Rosneft, also buys oil from the Russian state company. Nayara did not immediately respond to a request for comment.
Indian state refiners rarely buy Russian oil directly from Rosneft and Lukoil as their purchases are typically made through intermediaries, trade sources said.
Rosneft and Lukoil together supplied about 60% of the Russian oil purchased by India, said Prashant Vashisth, vice president at Moody’s affiliate ICRA Ltd.
“While India can substitute the purchases from Russia with suppliers from the Middle East and other regions, the import bill for crude oil would increase. On an annual basis, the replacement by market priced crude would lead to an increase in the import bill by less than 2%,” he said.
India has emerged as the biggest buyer of discounted seaborne Russian crude in the aftermath of Moscow’s 2022 full-scale invasion of Ukraine, importing about 1.7 million barrels per day in the first nine months of this year.
Privately-owned Reliance Industries , the top Indian buyer of Russian crude, plans to reduce or cease imports of Russian oil, including halting purchases under its large long-term deal with Rosneft, people familiar with the matter said.
“Recalibration of Russian oil imports is ongoing and Reliance will be fully aligned to GOI (Government of India) guidelines,” a Reliance spokesman said in response to a query on whether the company plans to cut its crude imports from Russia.
Indian state refiners including Indian Oil Corp , Bharat Petroleum Corp and Hindustan Petroleum Corp (HPCL.NS), opens new tab are also reviewing their Russian oil trade documents to ensure no supply will be coming directly from Rosneft and Lukoil after the U.S. sanctioned the oil companies, a source with direct knowledge of the matter said on Thursday.
India’s oil ministry and the state refiners did not immediately respond to requests for comment.
“There will be a massive cut. We don’t anticipate it will go to zero immediately as there will be some barrels coming into the market” via intermediaries, a refinery source said, declining to be named as they were not authorised to speak with media.
Reliance, which is controlled by billionaire Mukesh Ambani and operates the world’s biggest refining complex at Jamnagar in western Gujarat state, has a long-term deal to buy nearly 500,000 bpd of crude oil from Russian oil major Rosneft. The refiner also buys Russian oil from intermediaries.
In recent days, Reliance has purchased spot crude cargoes from the Middle East and Brazil, which could be used to partly replace Russian supplies, traders said. It was seen in the market on Thursday scouting for supplies, said a Middle Eastern trader approached by Reliance.
One of the sources said that before the U.S. move, Reliance was considering stopping Russian oil imports for the one of its two refineries that is export-focused due to a ban by the European Union on refined products produced from Russian oil that takes effect in January.
While the extent of the financial hit on Russia may be limited in the short term, the move is a powerful signal of Trump’s intent to squeeze Russia’s finances and try to force the Kremlin towards a peace deal.
STRAIN ON OIL REVENUES
It has already prompted Chinese state oil majors to suspend Russian oil purchases in the short term, trade sources told Reuters. Refiners in India, the largest buyer of seaborne Russian oil, are set to sharply cut their crude imports.
A drop in demand from Russia’s two largest customers will put a strain on Moscow’s oil revenues and force the world’s top importers to seek alternative supplies and push up global prices.
Trump, in his latest about-face on the conflict, said on Wednesday that the planned Putin summit was off because it would not achieve the outcome he wanted and complained that his many “good conversations” with Putin did not “go anywhere”.
“We cancelled the meeting with President Putin — it just didn’t feel right to me,” Trump told reporters at the White House. “It didn’t feel like we were going to get to the place we have to get. So I cancelled it, but we’ll do it in the future.”
Russia called the new U.S. sanctions unproductive and signalled that its conditions for ending its war in Ukraine – terms which Kyiv and many European countries regard as tantamount to surrender – remain unchanged.
The conflict raged on as European Union leaders and Ukrainian President Volodymyr Zelenskiy met in Brussels on Thursday to discuss funding for Ukraine, with momentum building to use frozen Russian assets to provide a 140 billion euro ($163 billion) loan to Kyiv.
Moscow said it would deliver a “painful response” if the assets were seized.
Indian refiners are poised to sharply curtail imports of Russian oil to comply with new U.S. sanctions on two top Russian producers, industry sources said on Thursday, potentially removing a major hurdle to a trade deal with the United States.
The change comes as India faces punishing 50% tariffs on its exports to the U.S. – with half of those duties in retaliation for Russian oil purchases – and negotiates a potential trade deal that could bring those tariffs in line with Asian peers in exchange for winding down crude imports from Moscow.
RUSSIA SHRUGS OFF IMPACT OF SANCTIONS
In another bid to starve Moscow of revenue, the EU also approved a 19th package of sanctions that includes a ban on Russian liquefied natural gas imports.
The EU has reduced its reliance on once-dominant supplier Russia by roughly 90% since 2022 but nonetheless imported more than 11 billion euros of Russian energy in the first eight months of this year. LNG now represents the biggest EU import of Russian energy.
The EU also added three Chinese companies to its Russian sanctions list, saying they were significant buyers of Russian crude oil and providing “substantial” revenue to Moscow. Beijing threatened to retaliate with unspecified measures.
Unveiling the oil sanctions, Scott Bessent, the U.S. Treasury Secretary, made clear Washington was targeting Russia’s ability to fund what has become Europe’s biggest land war since World War Two and was ready to take further action.
Russian oil and gas revenue, currently down by 21% year-on-year, accounts for around one quarter of its budget and is the most important source of cash for Moscow’s war in Ukraine, now in its fourth year.
However, Moscow’s main revenue source comes from taxing output, not exports, which is likely to soften the immediate impact of the sanctions on state finances.
Maria Zakharova, a spokeswoman for the Russian Foreign Ministry, shrugged off the likely impact, saying Moscow had developed what she called a “strong immunity” to such restrictions.