U.S. Sanctions On Rosneft & Lukoil Already Cutting Russia’s Oil Revenue, Treasury Says

U.S. sanctions on Russia’s top oil companies, Rosneft and Lukoil, are already lowering Russian oil revenues and are expected to reduce the amount of oil Russia sells in the future.

The measures, announced on 22 October, are one of the strongest U.S. sanctions since Russia’s full-scale invasion of Ukraine in February 2022.

The Treasury’s Office of Foreign Assets Control (OFAC) stated that its initial analysis of the sanctions’ market impact shows they are achieving their intended goal of lowering Russian oil prices and, in turn, reducing funds available to support the war in Ukraine.

The sanctions require companies to wind down dealings with Rosneft and Lukoil by 21 November, with violations potentially leading to exclusion from the U.S. dollar-based financial system. However, details on how the Treasury will enforce the sanctions remain unclear, particularly as China and India continue to be the largest buyers of Russian crude.

OFAC added that several Russian crude grades are at multi-year low prices. Almost a dozen major buyers from India and China have said they may pause purchases of Russian oil for December deliveries.

Data from LSEG Workspace showed Urals crude from Russia’s Black Sea hub at Novorossiysk traded at $45.35 per barrel on 12 November, the lowest since March 2023.

Russia had begun building a “shadow fleet” of tankers at that time to avoid a G7 price cap of $60 per barrel introduced in December 2023. On Monday, Urals crude rose slightly to $47.01 per barrel, while Brent crude traded at $64.03 per barrel.

Loadings at Novorossiysk resumed after being briefly stopped by a Ukrainian drone and missile attack. Earlier reports said that Russian oil discounts compared with Brent widened as Indian and Chinese refiners reduced purchases in response to the U.S. sanctions.

A Treasury spokesperson said the sanctions are “starving Putin’s war machine” and added that further action is possible if needed to stop the conflict in Ukraine.

Reference: Reuters

Source: Maritime Shipping News