The Effectiveness of Trump’s New Russia Oil Sanctions Depends on Stringent Enforcement

The Trump administration imposed sweeping new measures targeting Russia’s two biggest oil companies on October 22. The sanctions apply to Rosneft and Lukoil, along with 34 of their subsidiaries, and are the first to target Russia during President Donald Trump’s second term. In a press release announcing the designations, the Treasury Department warned it “will continue to use its authorities in support of a peace process” to end the war in Ukraine.

Deterring Enablers of Russia’s War Machine

Rosneft and Lukoil account for over half of Russia’s total oil production and roughly five percent of global oil supply. Given that the oil and gas sector generates roughly a quarter of Russia’s federal budget revenue, sanctions on these firms strike at the financial heart of the Kremlin’s war machine. The designations follow a similar action by the United Kingdom on October 16 targeting the two companies. They also come as the European Union rolls out new sanctions targeting Rosneft and Gazprom Neft, the latter having already been sanctioned by the United States and United Kingdom in January 2025.

The new U.S. sanctions, issued pursuant to Executive Order 14024, put foreign firms, including banks, insurers, and traders, at risk of being sanctioned if they continue doing business with or otherwise supporting the designated entities. That means they could soon be cut off from U.S. capital markets and the U.S.-led financial system. The risk is most pronounced for the Chinese and Indian firms — and their third-country intermediaries — responsible for purchasing, shipping, refining, or otherwise dealing in nearly 90 percent of Russia’s crude oil exports in September. Treasury issued a general license giving these firms until November 21 to wind down this activity.

Rosneft and Lukoil together supply about 60 percent of the Russian oil purchased by India and 25 percent of purchases by China. Indian refiners are now reportedly moving to slash imports of Russian oil. Reuters reported that Chinese state oil majors have also suspended purchases of seaborne Russian oil, although independent refiners — which account for most of China’s  imports of sanctioned oil — are likely to continue accepting deliveries.

The Missing China Link

These designations reach deep into the infrastructure of the Sino-Russian energy trade. Beijing sources roughly 20 percent of its crude from Russia. Beyond the purchase of seaborne crude, which China will reportedly suspend, Rosneft and the state-owned China National Petroleum Corporation also have a long-term supply contract under which significant volumes of crude are delivered through pipelines directly to Chinese refineries. Absent pressure from the United States, this arrangement will likely ensure a steady flow of discounted Russian oil to China. Trump will reportedly address China’s purchases of Russian oil during his meeting with Chinese leader Xi Jinping on the sidelines of the upcoming APEC summit in South Korea.

It’s All About Enforcement

The sanctions on Rosneft and Lukoil came as Trump shelved plans for a meeting with Russian President Vladimir Putin because Moscow refused to freeze the current front line of the conflict in Ukraine. That judgment is sound. Treasury must now follow through with sustained economic pressure and act on its threat to “continue to use its authorities” against Moscow.

This next phase should prioritize three steps. First, Washington should target foreign banks connected to Russia’s System for Transfer of Financial Messages (SPFS) — Moscow’s alternative to the Brussels-based SWIFT platform — which Russia uses to process transactions with non-Western partners. Second, Washington should join its European and British partners in more aggressively sanctioning the “shadow fleet” transporting Russian oil in defiance of Western sanctions.

Third, and above all, enforcement against third-country enablers — particularly in China and India — will determine whether these sanctions impose real costs on the Kremlin. Without coordinated, robust, and continued penalties for banks, refiners, traders, and shippers that facilitate Russia’s oil trade, sanctions will remain porous and Moscow’s war revenues intact. The credibility of U.S. economic power depends on how rigorously these measures are enforced.

Max Meizlish is a senior research analyst for the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD). For more analysis from Max and CEFP, please subscribe HERE. Follow Max on X @maxmeizlish. Follow FDD on X @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.