The United States has imposed sweeping sanctions on Russian oil giants Rosneft and Lukoil, marking one of the most consequential steps yet in Washington’s campaign to weaken Moscow’s ability to fund its war against Ukraine. The measures, announced on October 22, 2025, freeze all company assets in the US, ban transactions with American entities, and target 34 Rosneft subsidiaries along with key Lukoil divisions. Trading on the Moscow Exchange reacted sharply: Rosneft shares fell by 4.68%, while Lukoil dropped 5.09%.
A tightening economic noose
According to Russia’s Finance Ministry, oil and gas revenues account for roughly 22–25% of the federal budget, but the real dependence—factoring in export duties and indirect taxes—stands closer to 30–35%. The sanctions are expected to deepen fiscal stress on the Kremlin, particularly as export markets shrink and energy revenues decline. India, Russia’s top crude buyer since 2022, has been cutting purchases under pressure from Washington. President Donald Trump said New Delhi would “almost completely stop importing Russian oil” by the end of 2025, calling the process “irreversible.”
Global markets and price pressures
In July, the European Union lowered the price cap on Russian crude from $60 to $47.6 per barrel, reflecting a steady fall in the Urals benchmark. By late October, Russian oil traded below even that cap, threatening Moscow’s budget stability. Meanwhile, September attacks on Novorossiysk and the Caspian Pipeline Consortium (CPC) terminal disrupted over 2 million barrels per day of exports, while repeated strikes hit the Ust-Luga terminal in the Baltic. These disruptions have exposed the vulnerability of Russia’s export infrastructure.
Shadow fleet under scrutiny
To bypass existing restrictions, Russia has relied heavily on a “shadow fleet” of aging tankers. European regulators are now tightening oversight, citing environmental and safety risks. The EU is preparing a new maritime declaration to allow broader inspections of Russian-linked vessels suspected of sanctions evasion. With Gulf producers like Saudi Arabia, the UAE, and Kuwait ready to ramp up output by hundreds of thousands of barrels per day, Moscow faces growing competition and diminishing leverage in global markets.
Long-term consequences for the Kremlin
Economists warn that the impact of US sanctions on Rosneft and Lukoil will deepen over the coming months, accelerating a long-term decline in Russia’s economy. The loss of oil revenues is expected to drive higher taxes, tariffs, and inflation, eroding household incomes. For President Vladimir Putin, the measures signal the collapse of any remaining hopes for a quick easing of Western pressure. Despite Trump’s remark that he “hopes the sanctions will not last long,” the US and its allies view them as part of a broader strategic effort to constrain Russia’s war financing.
A collapsing energy empire
Moscow’s use of oil and gas as geopolitical tools has backfired. The country is now losing key markets such as India, facing price competition from the Gulf, and struggling to maintain export flows through damaged or risky infrastructure. With China unwilling to dramatically expand imports even at steep discounts, Russia’s once-mighty energy sector risks following Gazprom’s trajectory toward insolvency. The sanctions underscore a historic shift in the balance of power in global energy markets—and a growing economic isolation that could shape Russia’s future for decades.
