Chinese and Indian banks and refineries are moving to comply with US sanctions on Russia's two biggest oil companies, a US Treasury official said on 20 November.
The Trump administration imposed sanctions last month on Lukoil and Rosneft in an effort to cut revenues Moscow uses for its nearly four-year-old war on Ukraine. China and India are the top buyers of Russian oil.
Many Chinese and Indian entities are conscious of the sanctions and are "risk averse, do recognize the importance of the relationships with the West, and are moving to comply," the official told reporters in a call.
The Treasury's Office of Foreign Assets Control said on 17 November that its analysis of the initial market impact shows the sanctions announced on 22 October "are having their intended effect of dampening Russian revenues by lowering the price of Russian oil and therefore the country's ability to fund its war effort against Ukraine."
The action marked some of the strongest US sanctions since Russia's February 2022 invasion of Ukraine and the first direct sanctions President Donald Trump has imposed on Russia since taking office in January.
The sanctions established a 21 November deadline for companies to cease dealings with Rosneft and Lukoil. Companies that violate the sanctions risk being cut off from the dollar-based financial system.
OFAC's analysis found that several key grades of Russian crude are now selling at multi-year-low prices. Nearly a dozen major Indian and Chinese purchasers of Russian crude have announced plans to pause purchases of Russian oil for December deliveries, according to the analysis.
LSEG Workspace data showed benchmark Urals crude loaded at Russia's Black Sea oil hub of Novorossiysk traded at $45.35 per barrel on November 12, the lowest level since March 2023. At that time, Russia was just beginning to assemble a shadow fleet of tankers to avoid a G7-led price cap of $60 a barrel imposed in December 2023.
Brent crude futures stood at $62.71 on 12 November and traded at $64.03 on 17 November. Urals Novorossiysk rose to $47.01 on 17 November after loadings resumed at the Black Sea port following suspension caused by a Ukrainian drone and missile attack.
Reuters reported earlier this month that Russian oil discounts to Brent had widened as major Indian and Chinese refiners reduced purchases in response to US sanctions.
A Treasury spokesperson said the sanctions were "starving Putin's war machine" and the department "is prepared to take further action if necessary to end the senseless killing" in Ukraine.
Lukoil and Rosneft Both are giants in their market and have about 50 subsidiaries around the world, Radio Liberty reports. So, the consequences were felt not only in Russia.
Lukoil and Rosneft are Russia's two largest oil companies, with Rosneft being the state-controlled giant and the world's largest publicly traded petroleum company by output, while Lukoil is Russia's second-largest oil producer and the country's largest privately owned oil company.
Both have about 50 subsidiaries around the world. Lukoil operates in over 30 countries worldwide and sells petrol in 59 regions of Russia and in 17 other countries.
