What's the significance of US sanctions on Russian oil?
Watch: "It was time", says Trump on increase in Russia sanctions
- Published
US President Donald Trump has announced what he called "tremendous" new sanctions against two of Russia's largest oil companies, in a bid to pressure Moscow into ending its war on Ukraine.
The measures target Rosneft and Lukoil - two major oil corporations that help fund the Kremlin's "war machine", according to US Treasury Secretary Scott Bessent.
They represent the first direct interventions the Trump administration has imposed on Russia over its invasion, and have therefore been viewed as a geopolitically significant moment.
Which companies have been targeted by US sanctions?
The sanctions, imposed by the US Department of the Treasury's Office of Foreign Assets Control (OFAC), effectively blacklist Russia's two largest oil producers.
Rosneft, a state-controlled company headed by Russian President Vladimir Putin's close ally Igor Sechin, and Lukoil, a privately owned firm, account for nearly half of the nation's total crude-oil exports, according to Bloomberg estimates.
Between them, the two corporations export 3.1 million barrels of oil per day.
Rosneft alone is responsible for nearly half of all Russian oil production, which makes up 6% of the global output, according to estimates from the UK government.
Why is the US imposing sanctions now?
Ending the Russia-Ukraine war has become a focal point for Trump in recent months, and has gained new impetus after he helped to broker a ceasefire in Gaza.
A similar deal in Ukraine has so far eluded him, despite his campaign promises to solve the situation quickly. A summit with Putin in August failed to yield any tangible results, and Trump has grown increasingly frustrated with Moscow.
The US and its allies have so far been tentative about restricting the Russian energy industry, fearing wider impacts on the global economy.
But Trump has recently put more pressure on US allies to curb their spending on Russian oil - saying he would only issue sanctions when they did so.
It was Putin's refusal to end the "senseless war" that ultimately prompted the move, Bessent said on Wednesday.
The news comes a week after the UK imposed similar sanctions on Rosneft and Lukoil - and just a day after the White House said a planned follow-up meeting with Putin in Budapest would be shelved.
"Every time I speak to Vladimir, I have good conversations and then they don't go anywhere," Trump explained. "I just felt it was time. We waited a long time."
How significant are the new US sanctions?
The impact is being seen as symbolic as well as economic, because Trump has so far pinned his hopes on brokering a peace deal and has resisted issuing sanctions.
Two former US ambassadors to Ukraine suggested that the significance of the move remained to be seen in the long term.
The sanctions "will certainly hurt the Russian economy, which is already stumbling", Ambassador John Herbst told the BBC. "But I think it's naive to expect this step alone [will] push Putin to actually make peace and good faith."
"If we want Putin to actually negotiate in good faith, we have to maintain major pressure, economic and military, for many months. But this is a good start."
Bill Taylor, another former ambassador, told the BBC: "These sanctions are an indication to President Putin that he has to come to the table."
How could the US sanctions affect the war in Ukraine?
Trump has repeatedly endorsed proposals to freeze the fighting along current frontlines, suggesting that territory should be "cut the way it is".
Russia has pushed back against that idea, with Kremlin spokesperson Dmitry Peskov indicating Russia had not changed its position of wanting Ukrainian troops to leave the parts of the eastern Donbas region Kyiv still controls.
These new sanctions, against such a critical pillar of Russia's economy, could push it to reconsider that position. That is what the US is hoping for - though analysts who spoke to the BBC expected little immediate change on the ground.
According to Dr Stuart Rollo, a research fellow at the University of Sydney's Centre for International Security Studies, the sanctions serve two primary goals - "to materially impact Russia's industrial capacity to wage war, and to coerce Russia into accepting peace terms out of fear of the escalating impacts of sanctions on their economy and society".
Dr Rollo added: "They will not impact the former. They may impact the latter if a deft diplomatic balance is struck between the perceived consequences of continuing the war, and the benefits and concessions that will be furnished through a negotiated peace."
Michael Raska, Assistant Professor in the Military Transformations Programme at Singapore's Nanyang Technological University, said that, in the near term, the sanctions were "unlikely to alter the military balance in Ukraine".
But, he added, "as profit margins shrink, Russia will face difficult trade-offs between maintaining socio-economic stability, while financing a protracted war".
Which other countries could be hit by the sanctions?
These sanctions are sure to deal a blow to Russia's economy, with taxes from the oil and gas industries accounting for about a quarter of the nation's federal budget.
But the ripple effects could also be felt much further afield.
Oil and gas are Russia's biggest exports - with Moscow's biggest customers including China and India, the world's two most populous countries, and Turkey.
Together, China and India make up most of Russia's energy exports.
China last year purchased a record of more than 100 million tonnes of Russian crude oil, which accounted for almost 20% of its total energy imports.
Likewise, oil exports to India, which made up only a small fraction of its imports before the Ukraine war, has since grown to some $140bn (£103.5bn) since 2022.
Trump previously levied a 25% tariff on goods from India as what he called retaliation for such imports.
Although Trump said Indian PM Narendra Modi had assured him during a phone call on Tuesday that Delhi "was not going to buy much oil from Russia" as he too "wants to see the war end with Russia-Ukraine".
"Every time I speak to Vladimir, I have good conversations and then they don't go anywhere," Trump said after a meeting with Nato Secretary-General Mark Rutte
Trump is urging these countries to halt purchases of Russian oil altogether, forcing them to find alternative suppliers, possibly at a higher cost.
But refusal to do so could see China and India attracting secondary sanctions from the US.
Edward Fishman, a former senior US State Department sanctions official, suggested the significance of the new sanctions depends on what happens next.
"Will the US actively threaten secondary sanctions on the Chinese banks, UAE traders, and Indian refineries that transact with Rosneft/Lukoil?" he wrote on X.
"I expect, at the very least, some pullback from dealings with Russian oil in the short term."
On Thursday, a source with direct knowledge of the matter told Reuters that Indian state refiners were reviewing their Russian oil trade documents to ensure that no supply would be coming directly from Rosneft and Lukoil.
And Reliance, Indian's top buyer of Russian oil, also said it was recalibrating its crude imports from Moscow in response to the sanctions.
How could the sanctions affect global oil prices?
News of Trump's sanctions has already caused global oil prices to rise, with Brent - a leading international crude oil benchmark - measuring a 5% surge.
For comparison, Brent measured a 1.6% rise following the UK's announcement of sanctions against Rosneft and Lukoil last week.
That announcement led the Russian embassy in London to warn that targeting major Russian energy companies would disrupt global fuel supplies and increase costs worldwide - including for families and businesses in the UK.
Those ominous projections don't appear to have materialised to any major degree - and pale in comparison to the uptick measured over the past 24 hours, as Trump's announcement fuels uncertainty.
But Dr Rollo suggests that, even in this more recent case, the surge is unlikely to continue.
"In the medium- to long-term, I don't expect that this will impact oil prices globally, unless secondary sanctions on shipping and finance related to these companies come to be strictly enforced," he told the BBC.
Additional reporting by Peter Hoskins, Osmond Chia and James FitzGerald