US says sanctions on Rosneft and Lukoil already cutting Russia's oil revenue

The US Treasury said on Monday that US sanctions against Russian oil majors Rosneft and Lukoil are already reducing Russian oil revenues and are likely to reduce the quantity of Russian oil sold in the long term.

The Treasury's Office of Foreign Assets Control said in a statement that its analysis of the initial market impact of the sanctions announced on October 22 showed they "are having their intended effect of dampening Russian revenues by lowering the price of Russian oil and therefore the country's ability to fund its war effort against Ukraine."

The Treasury action was among the strongest US sanctions since Russia's full-scale invasion of Ukraine in February 2022 and the first direct sanctions imposed by President Donald Trump against Russia since taking office in January.

The sanctions set a November 21 deadline for companies to wind down dealings with Rosneft and Lukoil. Violators could be cut off from the dollar-based financial system.

But it was unclear how Treasury will enforce the sanctions. The two largest buyers of Russian oil have been China and India.

The OFAC analysis said that several key grades of Russian crude were selling at multi-year-low prices and noted that nearly a dozen major Indian and Chinese purchasers of Russian crude have announced intentions to pause their purchases of Russian oil for December deliveries.

LSEG Workspace data on Monday showed benchmark Urals crude loaded at Russia's Black Sea oil hub of Novorossiysk URL-NVRSK traded at $45.35 per barrel on November 12, the lowest level since March 2023. At that time, Russia was just beginning to assemble a "shadow fleet" of tankers to avoid a G7-led price cap of $60 a barrel imposed in December 2023.

Brent crude futures LCOc1 were $62.71 on November 12 and traded at $64.03 on Monday. Urals Novorossiysk rose to $47.01 on Monday. Loadings resumed at the Black Sea port after being suspended by a Ukrainian drone and missile attack.

Reuters reported earlier this month that Russian oil discounts to Brent had widened as major Indian and Chinese refiners cut purchases in response to the US sanctions.

A Treasury spokesperson said the sanctions were "starving Putin's war machine" and the department "is prepared to take further action if necessary to end the senseless killing" in Ukraine.

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