Putin responds to new U.S. sanctions against Rosneft and Lukoil

[silhouette tanker at sunset]
komisar/iStock via Getty Images

Crude oil is taking a breather after soaring by the most in four months, with WTI futures (CL1:COM [https://seekingalpha.com/symbol/CL1:COM]) now resting firmly above $60 per barrel. The catalyst for the jump was new U.S. sanctions on two of Russia's biggest energy giants: Rosneft and Lukoil. The two behemoths have been helping to "raise revenue for the Kremlin's war machine," but have been largely untouched by the West since the war in Ukraine started in February 2022.

_Thought bubble:_ Frustrated over how long negotiations are taking between Kyiv and Moscow, President Trump has been seeking additional leverage to force concessions and both sides to the table. The next measures were said to be a choice between supplying Ukraine with Tomahawk missiles or strengthening sanctions, but ultimately the latter won out as a more predictable choice. It's being taken now as there is plenty of oil awash in the market, so the restrictions will have less economic fallout. _Gas prices in the U.S. fall below $3 a gallon on average following OPEC+ production increases [https://seekingalpha.com/news/4505728-gas-prices-fall-below-3-a-gallon-on-average-in-the-us-following-opec-production-increases]_

While their effectiveness will come down to enforcement, the Trump administration is now threatening a financial blackout with secondary sanctions [https://home.treasury.gov/news/press-releases/sb0290]. It's a big deal as many foreign banks conducting oil transactions clear and settle in the U.S. under the petrodollar system. Financial institutions can now be forced to cease dealing with Rosneft, Lukoil, and their dozens of subsidiaries, or risk being cut off from the American banking system and their ability to deal in dollars.

"The new U.S. sanctions are serious for us and will have certain consequences, but they will not significantly impact our economic well-being," Russia's Vladimir Putin told reporters. "It's an attempt to put pressure on Russia. No self-respecting country ever does anything under pressure. Russia is a self-respecting country."

WILL IT WORK? Things will definitely get more complicated for buyers of Russian crude, like Indian and Chinese refiners, though a shadow fleet of hundreds of tankers has been operating for years despite hurdles in payments and insurance. There have also been transactions completed in other currencies, like Chinese yuan or the UAE's dirhams, but those have been limited as they lack the necessary liquidity and often involve a dollar conversion at some point. Further discounting may also be necessary to take on the additional risk, such as the falsification of documents, as well as the layering and laundering of oil trades through non-sanctioned intermediaries.

MORE ON CRUDE OIL

* Near-Record Gold/Oil Ratio Tilts In Favor Of Major Oil Bottom [https://seekingalpha.com/article/4832165-near-record-gold-oil-ratio-tilts-in-favor-of-major-oil-bottom]
* Commodities: Profit-Taking Hits Gold [https://seekingalpha.com/article/4831721-commodities-profit-taking-hits-gold]
* Gas Prices Fall To Lowest Level Of 2025 [https://seekingalpha.com/article/4831666-gas-prices-fall-to-lowest-level-of-2025]
* Oil surges as Russia sanctions roil market, but western enforcement is key [https://seekingalpha.com/news/4508018-oil-surges-as-russia-sanctions-roil-market-but-western-enforcement-is-key]
* Crude oil jumps after U.S. hits top two Russian oil companies with sanctions [https://seekingalpha.com/news/4507228-crude-oil-jumps-after-us-hits-top-two-russian-oil-companies-with-sanctions]