Locations Affected: Russia
On 10 January, the United States and the United Kingdom issued sanctions targeting the Russian energy sector, including its oil industry. The sanctions affect hundreds of Russian entities, including Public Joint Stock Company Gazprom Neft and Surgutneftegas – two of Russia’s largest oil companies – around 200 oil-carrying vessels, oil traders, energy officials, insurance companies, as well as liquefied natural gas (LNG) production and export. These sanctions also cut off Russia’s access to US services related to the extraction and production of crude oil and other petroleum products.
The affected tankers handled over 530 million barrels of Russian crude oil in 2024, accounting for 42 percent of Russia’s total oil exports by sea. China and India remain the top importers of Russian crude oil. Approximately 300 million barrels of crude oil exported by Russia in 2024 were shipped to China, with the majority of the remainder sent to India.
Reason for the Sanctions
The move, intended to reduce Russia’s funding for its war against Ukraine, comes as President Joe Biden prepares to finish his term this month. It also coincides with President-elect Donald Trump’s statement about a potential meeting with Russian President Vladimir Putin. According to senior US administration officials, the sanctions are expected to cost Russia billions of dollars per month and aim to provide the incoming Trump administration and Ukraine with a strategic advantage in any possible negotiations.
Impact of the Sanctions
- Secondary sanctions have not been imposed on other countries. However, the sanctions have raised concerns among refiners, tanker operators, traders, and port executives across Asia, particularly regarding the potential fallout for China and India, the largest importers of Russian oil.
- The sanctions further restrict the use of tankers previously involved in transporting oil to China and India, significantly impacting Russia’s oil exports.
- Oil prices rose by two percent on 13 January.
Outlook of the Situation
Russia is likely to attempt circumventing the sanctions, but significant disruptions and inefficiencies in its supply chains are expected. US officials do not foresee a major impact on the global oil market due to increased US oil production. However, countries reliant on Russian oil may experience disruptions for three to six months. The sanctions are also anticipated to increase global oil and freight costs in the short term. Additionally, Asian traders, particularly in China and India, may be compelled to shift their oil purchases to sources in the Middle East, Africa, and the Americas. Long term impact of the sanctions will also depend on the policy decisions by the incoming Trump administration.
