The sanctions imposed in October against Rosneft and Lukoil by the United States and the European Union represent a tightening of the economic pressure on Russia’s energy sector. By placing both companies on the SDN (Specially Designated Nationals) list, freezing their assets and banning transactions with Western entities, Washington significantly expanded the scope of restrictions. Brussels, for its part, banned all dealings with these firms and extended controls to third-party intermediaries.
Targeted tightening avoids physical disruption
Despite their severity, the measures preserve part of the commercial channels. A temporary general licence issued by the US allows for a wind-down period until 21 November, confirming the intent to avoid a supply shock. The framework follows the G7’s price cap strategy, aiming to curtail Kremlin revenues without disrupting global crude markets.
The International Energy Agency (IEA) forecasts a structural supply surplus for 2026, estimated between 2 and 4 million barrels per day. In this context, the sanctions raise operational costs for Russian producers without significantly reducing global volumes. The result is a gradual re-routing of flows toward Asia, particularly China and India, relying increasingly on secondary actors and non-Western trade networks.
India: majors exit, fragmented purchases rise
Reliance Industries’ decision to halt Russian crude imports for its Jamnagar refinery illustrates the direct impact on players exposed to European markets. State-run refiners such as Hindustan Petroleum and Mangalore Refinery are turning to unsanctioned suppliers operating in jurisdictions less vulnerable to US extraterritorial regulations. This strategy aims to maintain access to Russian discounts while avoiding secondary sanctions.
Import patterns are becoming more complex, involving unlisted traders often operating under neutral flags. Fiscal incentives and origin-based tariffs reinforce this optimisation logic, allowing refiners to benefit from price differentials while limiting compliance exposure.
China: strategic continuity and stockpiling
Beijing maintains stable import levels from Russia, without substantial changes in volume. While diversifying sources (Africa, Americas, Middle East), China continues to absorb significant Russian volumes, particularly via Arctic and eastern routes. This consistency aligns with a broader strategy of supply security and enhanced strategic reserve utilisation.
China’s strategic reserve is estimated to be about 60% full, providing a substantial buffer in the event of future sanctions escalation. By combining opportunistic purchases with quality/price arbitrage, Chinese refiners strengthen their negotiating position in the regional market.
A parallel oil network emerges
Faced with restrictions, Russia has activated an ecosystem of shell companies, obscure traders and a “shadow fleet” to maintain its exports. These flows transit through blending hubs such as the CPC terminal or Arctic ports, under non-Western flags and non-P&I (Protection and Indemnity) insurance. This model increases compliance risk, especially for banks, insurers and charterers operating near these opaque circuits.
Simultaneously, the United States is redirecting West Texas Intermediate (WTI) barrels toward Asia, with rising sales to Vietnam, Indonesia and South Korea. Jakarta is accelerating a modular refinery programme designed to process this crude under a bilateral energy agreement, reinforcing the US–Southeast Asia energy corridor.
Global surplus moderates price impact
The global oil surplus forecast for 2026 limits Russia’s ability to influence prices, even under temporary disruptions. Analyst projections place Brent prices between $57 and $62/b, factoring in excess supply and moderate OPEC+ discipline. This backdrop contains the inflationary potential of sanctions while reinforcing the logic of economically sustainable pressure.
Asian refiners with multi-crude capacity, able to process WTI, Murban, Basrah, CPC or Urals, are emerging as key beneficiaries of this market fragmentation. Their logistical and contractual flexibility enables them to capture higher margins while staying compliant with increasingly stringent regulations.
Rising legal risk for intermediaries
Companies directly or indirectly linked to Rosneft and Lukoil now face exposure to US sanctions, even through subsidiaries owned below the 50% threshold. Trading firms based in “neutral” jurisdictions are accumulating increasing levels of risk. Their banking, logistics and insurance relationships are becoming harder to maintain.
Financial institutions, maritime insurers and shippers must tighten their due diligence frameworks. Screening beneficial owners, verifying transshipment documentation and tracking voyage routes are now core governance requirements. Any traceability gap may trigger exclusion from Western financial systems.
