After Strict U.S. Sanctions, Fewer Takers for Russian Oil

The new U.S. sanctions pressure on Russian oil appears to be having the intended effect, according to multiple reports from oil traders and tanker trackers. Russian volumes stuck at sea are rising, the Chinese and Indian refiners who normally buy the product are less interested than they were a month ago, and the discounts on offer are widening fast.

The new American sanctions on top producers Rosneft and Lukoil have cut a large tranche of Russian oil exports out of the "compliant" market, and the implementation deadline for the sanctions listing arrives on Friday. After that point, firms risk serious U.S. penalties for transacting with either of the two Russian oil giants, which together account for most of the nation's oil exports.

As of Monday, Russian Urals crude was trading at just $36.61, according to Bloomberg - about $23 less than Brent. This is nearly twice the usual discount in recent months, though still short of the records hit in the first year of the Ukraine invasion, and reflects the difficulty of finding buyers for Rosneft and Lukoil's products.

Chinese refineries, the largest buyers of Russian oil, have been taking a pause on purchasing. According to Rystad Energy, China's imports from Russia will likely drop by at least 500,000 bpd in November, and from Iran as well. Recent U.S. sanctions on Chinese port terminals for importing blacklisted Iranian crude have sent the message that the restrictions will be enforced, and violators will be penalized if caught.

In addition to sanctions measures, Trump administration has also levied steep tariffs on Indian goods in order to coerce India's government to crack down on domestic refineries' purchasing of Russian oil, and the leverage has largely worked. Indian refiners have cut their loadings from Russia by 66 percent so far this month, according to The Economic Times. In a policy paper released Tuesday, Indian think tank GTRI called for the U.S. tariffs to be lifted promptly in order to reward India for cutting down on Russian crude (and for buying much more American crude and LPG).

The reduced buying and rising storage shows signs of early success for the enhanced sanctions strategy, but only enforcement and time will show the full outcome. Iran's blacklisted oil industry provides a cautionary tale: though sanctioned since 2017 and placed under "maximum pressure" in the beginning of 2025, Iran posted a seven-year record high of 2.3 million barrels per day of export volume in October, per TankerTrackers.com - nearly all of it sold to privately-held Chinese refiners.

It is difficult to suppress the trade in the long term, in part because of the sheer opportunity for profit. Large discounts on a "sensitive" crude supply create an attractive incentive for traders, since the oil can be sold at a markup if it can be made palatable for legitimate buyers. The opportunities are lucrative: after the invasion of Ukraine, one 27-year-old independent trader made $250 million by buying and selling Russian products that larger firms didn't want to touch, according to the FT.