Move restricts Moscow’s war revenues via oil sales to India, China
By TN Ashok
NEW YORK: On Wednesday October 22, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions on Russia’s two largest oil companies, Rosneft PJSC and Lukoil PJSC, and a range of their subsidiaries. The move is explicitly linked to the war in Ukraine: the Treasury states the action “increase[s] pressure on Russia’s energy sector and degrade[s] the Kremlin’s ability to raise revenue for its war machine and support its weakened economy.”
At face value this appears to be a significant escalation in U.S. policy under Trump’s second term — it is “the first Ukraine-related sanctions on Russia in Trump’s 2nd term.”
But the broader pattern is familiar: bold rhetoric, a dramatic announcement, then signs of strategic ambiguity and geopolitical hedging. Trump’s past dealings with Russia – both in his first term and beyond – have included sanctions, tariff threats and “laser-like” focus on energy dependence, yet also frequent disengagement and de-escalation.
The tension is often palpable — that Trump wants to posture as the warrior-in-chief for Ukraine, but also remains wary of undermining the dollar’s primacy, global oil markets, or driving energy-price shocks at home.
For instance, one senior White House official told NBC News that Trump was following his “gut” on the timing of the sanctions. Meanwhile, Reuters reports the sanctions announcement came just after a cancelled summit with Vladimir Putin, and emphasises that despite the sanctions “analysts said the measures were a big step but long overdue.”
The tension thus is: strong talk about degrading Russia’s war-machine, yet simultaneously an unwillingness (so far) to fully cut energy flows or claw back territory lost in the Donbas region. In short: sanctioning Russia’s oil industry while at the same time signalling a potential soft landing behind the scenes.
From a technical Viewpoint, the sanctions achieve several benefits. Oil and gas remain major pillars of Russia’s state budget and exports. By targeting the largest oil firms, the U.S. is aiming to hit Russia at a systemic level.
These sanctions broadcast to Russia (and to third-party buyers) that continued business with Russia’s dominant oil firms carries elevated risk.
The U.S. uses the sanction as leverage to influence other countries buying Russian oil: “We encourage our allies to join us and adhere to these sanctions.”
The announcement caused oil futures to rise ~2% as markets factored the possibility of supply disruptions from Russia or rerouting.
Yet there are limitations and risks. The sanctions cover the companies themselves, but unless broadly backed by sanctions on buyers or shipping/trading infrastructure (the “shadow fleet” of Russian oil tankers) the flows may continue under different names. Indeed past sanctions on Russia’s energy sector have often failed to dent the volumes significantly.
If global oil prices spike or alternative supply is constrained, the U.S. domestic economy could suffer. Trump himself has noted caution about the dominance of the dollar in global oil transactions if sanctions push Russia to promote payments in other currencies.
The sanctions do not by themselves reclaim occupied Ukrainian territory or force a ceasefire. They are part of a broader diplomatic toolkit but cannot deliver military outcomes. Thus, the measure is significant but itn is far from a silver bullet.
Thus, the measure is significant — but it is far from a silver bullet.
The complex axis in this whole narrative lies in Asia — specifically the roles of India and China as major buyers of Russian fossil fuels, thereby softening the intended impact of Western sanctions.
According to the Helsinki-based think-tank Centre for Research on Energy and Clean Air (CREA), from December 2022 to end-September 2025, China imported ~47 % of Russia’s crude oil exports, followed by India at ~38%.
In more concrete terms, Indian refiners in September 2025 bought Russian crude worth about ₹ 25,597 crore (~US $3 billion) in a single month. These flows matter for three reasons:
Reliance exported Rs 6,850 cr worth of fuel from Russian oil to US: Report. Reliance, Nayara gain USD 16 billion from discounted Russian crude as exports to EU, US rise.
India imported 231 million barrels of Urals crude in the first half of 2025, with Reliance and Nayara accounting for 45% of the total imports, data showed. They provide Russia with a market despite Western price-caps and embargo efforts.
They undermine, in part, the leverage the U.S. and its allies hope to exert by saying: “If you keep buying their oil, you are supporting the war.”
They create a geopolitical friction point: namely, the U.S. expects India (and to a lesser extent China) to moderate purchases if the Russia-Ukraine war is going to be contained.
Specifically, Reuters reported that Indian state refiners are reviewing their Russian contracts to ensure they do not come directly from Rosneft or Lukoil — the newly-sanctioned firms. Meanwhile, the U.S. is reported to be pressing India for a trade deal contingent on reducing Russian oil imports.
The Washington view appears to be: India is acting as a “release valve” for Russian oil, allowing Moscow to keep exporting despite Western sanctions. Reuters puts it this way: “Trump’s India squeeze to push Russian oil further into the shadows.”
As the EU and US are pressuring India to reduce imports from Russia, India can easily diversify its purchase of crude, but may not fully stop buying from Russia
The sanctions on Russia thus feed into a broader U.S. strategy of economic pressure. According to a headliner: “The U.S. has not imposed the tariffs on China, another major buyer of Russian oil.” However, the U.S. has applied tariffs on Indian imports in relation to its Russian oil purchases. The story is that the U.S. imposed additional tariffs of up to 25 % on goods from India in retaliation but excluded China under the same ambit.
From the Indian perspective: on one hand India needs cheap energy — Russian crude has been attractive because of deep discounts and logistics favourability. India has arguably exploited that price differential to its advantage. On the other hand, New Delhi faces U.S. pressure: either reduce Russian oil imports (as part of a U.S.–India trade package) or face higher tariffs/other consequences.
Thus India is in a strategic bind: its energy security (and cost competitiveness) demand a supply of cheap crude; but its strategic partnership with the U.S. — especially in a shifting geo-strategic Asia-Pacific environment — demands compliance with U.S. no-Russia opportunities.:
The sanctions target its top oil companies. If backed by wide-scale enforcement (shipping, trading, financing) they can raise its cost of capital, reduce its revenues and eventually erode its ability to sustain the war-economy.
Yet given that the majority of Russia’s oil is now still finding buyers (in Asia) the near-term effect will likely be modest. Indeed, one analyst said: “So far, almost all the sanctions against Russia for the past 3.5 years have mostly failed to dent either the volumes produced by the country or the oil revenues.”
In short: Russia still has stubborn resilience. The sanction may bite over time, but immediate breakthrough on the war front is unlikely.
China is one of the fastest-growing economies in the world. This means the country is highly dependent on rich energy sources. In fact, it was the largest energy consumer in 2020. But China isn’t just a net importer of oil and other fossil fuels, it was also the largest producer of energy in 2020, to 2021 This is due to the state-owned companies that explore, refine, and produce energy products, including crude oil. Many of these appear on Fortune’s Global 500 list of top companies.
Data reveals strong Russian oil purchases continuing despite U.S. pressure. For example, Indian refiners reviewing contracts (but not yet entirely ceasing). If India does reduce Russian oil imports, it will likely raise its cost of procurement, forcing higher prices for refined products or increase reliance on Middle East crude (with potentially higher logistics cost). That could strain Indian energy margins and consumer prices. The U.S. tariff threat adds a second dimension: reducing the attractiveness of trade with the U.S. if energy independence is compromised.
: While less publicly pressured by the U.S. (so far) regarding Russian oil purchases, China remains the biggest single buyer of Russian crude exports. The Western pressure – and the sanctions on major Russian players – increase China’s bargaining power (Russia may offer deeper discounts) but also increase the risk of geopolitical complication (shadow-fleet risks, finance/trade sanctions).
Sanctions of this kind are part of the economic warfare being waged by the West against Russia. The idea is to raise the cost of Moscow’s war machine so that either Russia seeks peace or its capacity to sustain the war erodes. But there are three caveats:
The sanctions don’t automatically translate into meaningful battlefield shifts (troop withdrawals, territory return). Without military leverage or credible negotiations, Russia may hold its ground.
If India/China continue to buy Russian oil, Russia’s ability to circumvent Western financial architecture remains strong. The “release valve” effect means Russian revenues may not collapse.
The U.S. behaviour here is somewhat inconsistent: strong sanctions on Russia’s oil sector, but at the same time reluctance to forcefully push Putin on territory in Donbas or the occupied zones. The war has evolved into a war of attrition, and the U.S. may be tacitly accepting a long haul rather than a swift resolution.
Hence, while the sanctions send a strong signal, the effectiveness depends heavily on third-party compliance, enforcement, and the willingness of Russia’s buyers to pivot away.
Opposition parties in India are raising the question whether India’s top billionaires or its energy firms are part of a “deep state playing both sides” — i.e., simultaneously exploiting Russian oil discounts and managing U.S. strategic alliances. While there is no credible source that explicitly documents Indian billionaires as part of a covert “deep state” arrangement, the reality is subtle:
Indian state refiners (many of them public-sector, e.g., in IndianOil, Bharat Petroleum, etc) are reportedly reviewing their Russian contracts to avoid sanctioned sources. Oil & Gas sector PSUs are state owned but have functional autonomy and their boards can made individual choices based on their profit lines and can keep their nodal ministry of Petroleum & Natural Gas informed and not run to their doors for approvals.
The commercial incentive to buy discounted Russian oil is strong, especially given India’s energy needs and refining capacity.
At the same time, India’s foreign policy has traditionally emphasised strategic autonomy: balancing U.S., Russia, China interests rather than aligning wholly with one camp. For instance, Prime Minister Narendra Modi reinforced India-Russia ties even as the U.S. raised tariffs over Russian oil purchases.
So while the term “deep state” may be hyperbolic, what we do see is elite commercial and strategic actors in India navigating a complex set of interests: energy security, economic cost-competitiveness, trade relations with the U.S., and strategic partnership with Russia. Whether this counts as “playing both sides” depends on a vantage point — pragmatic hedging or opportunistic double-bookkeeping.
The U.S. strategy is not simply to sanction Russia; it is to impose secondary pressure on countries that continue to buy Russian oil. For India, this has taken the form of tariff threats on imports. For example, one media report noted the U.S. to hike tariffs on India to 50 % over Russian oil purchases.
Add to that the trade negotiations: Indian media reported that a U.S.–India trade deal under discussion might reduce U.S. tariffs on Indian imports — if India agrees to gradually reduce Russian oil imports.
Thus the logic is: “Reduce Russian oil purchases → we ease tariffs/trade pressure.” India must ask itself: is cheaper oil worth the long-term cost of trade friction with the U.S.? And how much of its strategy is defined by energy versus strategic alignment?
While the sanctions are strong in intent, the overall U.S. posture on Ukraine has aspects of concession or accommodation. For example, analysts note that despite sanctions, the war in Ukraine continues, Russia holds large swathes of territory in the Donbas and south, and the West has yet to compel a meaningful ceasefire. The U.S. sanctions may signal resolve, but they are not matched with military commitment to reclaim territory. In simple terms: economic tools without full-scale enforcement or battlefield leverage may leave Russia freer to dig in.
It is worth emphasising that sanctioning oil companies is important — but not sufficient to reverse territory capture or force a rapid settlement. The Kremlin may choose to de-escalate commercially (offering prices, shifting buyers) while still holding military gains.
If Moscow sees the risk of unbounded sanctions and export losses, it may reluctantly negotiate; alternatively, it may persist until a negotiated settlement on its own terms emerges.
In sum, the United States under Trump has declared a major escalation in its sanctions regime against Russia by targeting Rosneft and Lukoil. It is meant to hit the heart of Moscow’s oil-export machine and to compel other countries (notably India) to join or face trade consequences. At the same time, the systemic dependencies – India’s energy needs, China’s appetite, Russia’s alternate export routes – mean the leverage is fragile and the outcome uncertain.
If India and China pivot away from Russian oil, the pressure would ratchet up dangerously for Moscow’s war-economy. But if they hold firm (or only moderate modestly), the sanctions risk becoming symbolic. Moreover, without a clear military/diplomatic path to force Russia out of occupied Ukrainian territories, the sanctions alone may not deliver a swift peace.
Finally, India’s balancing act – cheap Russian oil vs. closeness to the U.S. – remains an open question, and whether Indian energy elites are simply opportunistic or strategically hedging may depend less on covert “deep state” machinations than on the pragmatic calculus of cost, risk and strategic autonomy.
The game is set. The prize: whether Russia pays a real price for the war, or whether it finds new lifelines via Asia. And whether the U.S. is willing to turn bold sanctions into a sustained, enforced campaign — rather than a one-off headline. (IPA Service)
