DEEP DIVE — On October 22, 2025, in his boldest move yet to force Vladimir Putin back to the negotiating table, President Trump unleashed sweeping U.S. blocking sanctions on Russia’s energy giants — state-controlled Rosneft and privately held Lukoil, the two companies that pump nearly half of Moscow’s crude exports and bankroll the Kremlin’s war in Ukraine.
These aren’t slap-on-the-wrist measures. The designations freeze every asset these firms have in the U.S., ban American companies and citizens from any dealings with them, and put the world’s banks, refiners, and traders on notice: keep helping Rosneft or Lukoil, and you could be next under secondary sanctions.
Putin fired back quickly, branding the move an “unfriendly act” and vowing Russia “won’t bend,” but even he admitted “some losses are expected” as the Kremlin scrambles to shield its oil cash cow.
Markets didn’t wait for the dust to settle: Brent crude rocketed nearly 6 percent in a single day, hitting around $66 a barrel, as traders priced in the chaos. All eyes instantly shifted to the mega-buyers, India and China: would they defy Washington and keep discounted Russian oil flowing?
A month later, the squeeze is tightening: Russian Urals crude now trades at a painful $20 discount to Brent, Indian and some Chinese buyers have hit pause, and Moscow is desperately rerouting through shadowy intermediaries. With the U.S. wind-down window slamming shut on November 21, the big question looms larger than ever.
The sanctions hammer has landed hard — but will it finally cripple Putin’s war machine, or force Russia to get sneakier? And under what conditions do these measures actually bite?
“If you really work on sanctions and make them effective and implement them with rigor and offer a path out, they can be pretty effective. See Iran, South Africa, Libya,” Richard Nephew, a Senior Research Scholar at Columbia University’s Center on Global Energy Policy and a former U.S. sanctions official who served as the lead sanctions expert in the Obama administration’s Iran nuclear negotiations, tells The Cipher Brief. “If you do them as a way of just getting the press or activists to leave you alone, then they don’t work.”
The Theory of Oil Sanctions: Coercion via Crude
At its core, the rationale for oil sanctions is compelling and straightforward: many authoritarian regimes depend heavily on oil exports for a large share of their state revenue. By targeting the oil sector — blocking key companies, choking off trade, and denying access to Western finance — the goal is to slash those export earnings, intensify economic pain, erode the regime’s ability to fund wars or strategic ambitions, and ultimately force a behavioral change.
This logic has long been a cornerstone of U.S. foreign policy toward oil-rich adversaries like Iran, Venezuela, and now Russia, precisely because petroleum is both a strategic lifeline and a uniquely vulnerable pressure point. Over the past two decades, the overall use of economic sanctions has exploded, with energy sanctions standing out for their rare ability to deliver simultaneous economic and military leverage.
Yet experts caution that Washington often conflates pain with success.
“The U.S. often thinks about sanctions effectiveness the wrong way,” Rosemary Kelanic, Director of the Middle East Program at Defense Priorities, tells The Cipher Brief. “Effectiveness should be measured in terms of whether sanctions could achieve the desired policy outcomes, not just whether they impose costs.”
For Moscow, she stresses, the stakes are existential.
“Historically speaking, sanctions sometimes convince countries to give in on issues of minor importance, but they practically never compel countries to abandon vital national interests,” Kelanic continued. “For Russia, Ukraine is important enough to fight a long, slogging war over.”
In theory, when tightly enforced and backed by genuine international coordination, these measures can severely restrict foreign-exchange inflows, impose steep costs on rerouting exports, strain domestic budgets, curb military spending, and shift a regime’s calculus. In practice, however, the historical record reveals that outright success is elusive — evasion, adaptation, and incomplete coalitions often blunt the blow.
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Why the Record Is Mixed
Even the toughest oil sanctions can falter without ironclad enforcement. Announcing penalties is easy; making them bite requires global banks, refiners, shippers, and buyers to comply. If Rosneft or Lukoil can still sell through opaque brokers, shadow tankers, or non-dollar deals, much of the intended pain evaporates. Treasury recognized this by explicitly threatening secondary sanctions against any foreign entity that continues to deal with the two giants.
Nephew says that the early signs of real pressure will be visible on shipping patterns.
“The biggest macro indicator will be whether we see prices going up, the semi-glut of oil being tapped, and oil coming off of the water,” he observed. “On a more micro level, if we see that there are additional sanctions being imposed on Russian cut-outs, if we’re seeing ports continuing to deny ships with oil, if we’re seeing indications of pipelines no longer carrying this oil into China. Those are the sorts of things that will be indicative of exports drying up.”
Russia, for one, has proven adept at evasion. After earlier measures, it built a vast “shadow fleet” of aging, untraceable tankers and rerouted most exports to Asia. A recent European Council on Foreign Relations report warns that unless Europe fully aligns — closing asset-divestment loopholes and mirroring U.S. measures — the squeeze will remain partial.
Global oil markets themselves have grown more resilient. The dollar’s once-dominant role has eroded; China, India, and others now buy discounted crude and settle in yuan or rupees. Iran’s exports collapsed under “maximum pressure,” then recovered to over 1.5 million b/d through similar workarounds. Russia has followed the same playbook, shifting nearly all seaborne volumes eastward since 2022.
Nephew points out that none of this is new.
“Smuggling has been a feature of sanctions forever,” he said, highlighting that alternative payment networks may look innovative. Still, countries have long relied on hawala-style systems to dodge banking restrictions. “What makes a difference is the commitment of governments to enforce sanctions and to pay costs to do so.”
Sanctions can also backfire. Disrupting supply often spikes global prices, partially offsetting the loss of volumes for the sanctioned producer. Brent jumped 5 to 6 percent the day Rosneft and Lukoil were hit, temporarily boosting Russia’s per-barrel revenue even as discounts widened.
Finally, pain tolerance matters. Oil and gas still fund roughly 25 to 30 percent of Russia’s federal budget, a heavy blow but not a fatal one. With once-huge reserves still significant, domestic repression to shift burdens to citizens, and eager buyers in Asia, Moscow can endure far longer than many Western policymakers expect. History shows that oil sanctions rarely force rapid capitulation; they inflict damage slowly and decisively only when the target is already economically fragile and internationally isolated. Russia, so far, is neither.
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Making Oil Sanctions Work
Experts emphasize that oil sanctions can be far more effective if the U.S. and its allies act as a unified bloc rather than going it alone. The recent sanctions on Rosneft and Lukoil explicitly call on Europe and others to join by banning imports, seizing Russian companies’ assets, and closing loopholes that still allow some countries to buy discounted oil. Without this coordination, Russia reroutes its crude to willing buyers. Experts warn that half-measures create safe havens and sharply reduce the pain—true pressure demands everyone play by the same rules.
A second big fix is plugging the leaks in global shipping and finance. The new U.S. measures take a tougher line by directly threatening secondary sanctions against any bank, refiner, or broker that continues to deal with Rosneft or Lukoil. Better satellite tracking of ships and aggressive follow-through on those threats could choke off the underground routes that have kept Russian oil flowing despite years of sanctions.
Nephew argues that enforcement, not the sanctions themselves, was what made the Iran campaign effective. The BNP Paribas case, which carried massive penalties, showed banks that Washington meant business.
“We imposed really stringent sanctions that threatened a lot of people with ruin if they moved Iranian money,” Nephew recalled. “So long as the U.S. has an important economy, we’ll have some measure of economic power that can be used for sanctions power. We just won’t have as much ability to dictate terms; we’ll have to think about who to target and how. But, as for energy sanctions in general, so long as the world needs energy, denying it is going to carry weight.”
Kelanic also pointed out that the global oil system is more shock-absorbent than many assume.
“There’s plenty of oil that can cushion the market if any supply disruptions occur,” she explained.
That flexibility allows it to sustain pressure for longer without triggering global price spikes.
Third, sanctions work best when the goals are realistic and the timing is right. Asking Moscow to end the war overnight is unlikely to succeed; more achievable aims — like making new weapons harder to buy or keeping revenues low long-term — have a better shot, especially when paired with incentives, such as easing some restrictions for good behavior, and help for ordinary people caught in the crossfire. The global oil market has also changed dramatically: trades now happen in yuan or rupees through non-Western networks, so sanctions must constantly evolve to target those new pathways.
Oil Sanctions in Action: Three Big Examples Compared
The impact of oil sanctions depends heavily on the target’s strength, isolation, and resilience. Three recent cases show how different those outcomes can be.
Iran (2012–today): U.S.-led sanctions crushed Iran’s oil exports from 2.5 million barrels a day down to under 500,000 at their peak. It was excruciating and forced Tehran to the negotiating table for the 2016 nuclear deal. Yet once the pressure eased a bit, Iran bounced back; today it quietly ships 1.5 to 2 million barrels a day, mainly to China, using ghost tankers and creative payment tricks. Analysts underscore that sanctions can deliver massive short-term pain, but determined countries learn to live with them.
Venezuela (2019–today): Sanctions hammered the state oil company, PDVSA, and slashed exports, but Venezuela was already falling apart due to corruption, mismanagement, and hyperinflation. The regime lost a lot of cash yet made almost no real concessions — it just tightened its grip and kept surviving. Experts point out that if a country is already in free fall, additional pressure from sanctions doesn’t force significant political change.
Russia (2022–now, sharpened October 2025): Russia is different. It started with substantial cash reserves, a modern economy, and eager customers in China and India. The new direct sanctions on giants Rosneft and Lukoil are the toughest yet. Still, Russia has spent years building shadow tankers and Asian trade routes. Oil prices are down, and the discount on Russian crude is painful, but Moscow keeps exporting almost as much as before. Thus, when the target is big, rich, and has willing buyers outside the West, sanctions hurt but don’t quickly break the Kremlin.
A Tool Under Strain but Not Broken
Oil sanctions can hurt but they rarely force quick political surrender. Iran showed that sustained pressure can shift behavior, yet Russia and Venezuela demonstrate how resilient or already-collapsing regimes can absorb the pain and adapt. The new U.S. measures against Rosneft and Lukoil are the most challenging test yet of whether this tool can still bite in a more multipolar world.
Their impact ultimately hinges on strict enforcement, coordinated allies, closed loopholes, and whether the target is structurally vulnerable. Yet, if buyers keep finding workarounds and Russia keeps rerouting crude through shadow networks, the sanctions may sting without delivering major strategic change. The coming months will indicate whether oil sanctions remain a credible tool or drift into symbolism.
As Nephew puts it, “No tool works if it is applied halfheartedly, mildly or inconsistently.”
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