The US Treasury Department said on Monday that US sanctions against Russian oil companies Rosneft and Lukoil are already reducing Russia’s oil revenues and are likely to reduce Russian oil sales in the long term.
According to Reuters, the U.S. Treasury Department’s Office of Foreign Assets Control said its analysis of the initial market impact of the sanctions announced on 22 October showed that they “have the desired effect of reducing Russia’s revenues by lowering the price of Russian oil, and therefore the country’s ability to finance its military efforts against Ukraine.”
The Treasury Department’s actions were among the strongest U.S. sanctions since Russia’s full-scale invasion of Ukraine in February 2022 and the first direct sanctions imposed by President Donald Trump against Russia since taking office in January.
The sanctions set a deadline of 21 November for companies to stop cooperating with Rosneft and Lukoil. Violators could be cut off from the dollar-denominated financial system.
But it’s unclear how the Treasury Department will enforce the sanctions. The two largest buyers of Russian oil were China and India. OFAC’s analysis indicates that several key grades of Russian crude are selling at multi-year low prices and notes that nearly a dozen major Indian and Chinese buyers of Russian crude have announced intentions to suspend their purchases of Russian crude for December deliveries.
LSEG Workspace data on Monday showed that benchmark Urals crude loaded at Russia’s Black Sea oil hub of Novorossiysk was trading at $45.35 a barrel on 12 November, the lowest level since March 2023. At the time, Russia was just beginning to build a “shadow fleet” of tankers to avoid the $60 a barrel price cap set by the Group of Seven countries in December 2023.
Brent crude futures were at $62.71 on 12 November and traded at $64.03 on Monday. The price of Urals Novorossiysk crude rose to $47.01 on Monday.
Reuters reported earlier this month that discounts on Russian crude compared with Brent had widened as major Indian and Chinese refiners cut purchases in response to U.S. sanctions.
The Finance Ministry said the agency was “ready to take further action if necessary to stop the senseless killings” in Ukraine.