After cancelling a planned summit with President Putin, the Trump administration in the US has announced the imposition of sanctions on two of the largest Russian oil companies, Rosneft and Lukoil.
The US Department of Treasury announced on 22nd October that “given President Putin’s refusal to end the war in Ukraine, Treasury is sanctioning Russia’s two largest oil companies that fund the Kremlin’s war machine.”
The move has demonstrated both President Trump’s frustration with Moscow and his willingness to take coercive measures to end a war that he claimed he would end within 24 hours.
What is at stake?
Since the Russian President Vladimir Putin began his special military operation in Ukraine in February 2022, Western nations have unanimously condemned the attack and imposed sanctions on Russia.
However, most of these sanctions were of an economic nature and revolved around the freezing of Russian assets in Western states. Joe Biden, Trump’s predecessor, had been reluctant to impose sanctions on Russian oil fearing a spike in the oil prices in the global market. This led Moscow to continue operating its mission in Kyiv unscathed.
Despite financial sanctions and predictions of economic collapse, the Russian economy has persevered by relying on its oil and gas exports. In 2024, oil and gas revenues accounted for 30% of Russia’s federal budget.
This revenue has kept the flailing Russian economy afloat, which allowed Putin to continue his war machine running against Ukraine. The absence of assertive action from Washington had given the Russian economy a breathing space to continue operating despite the financial sanctions.
However, Trump’s sanctioning of the two largest oil conglomerates in Russia might mean that the heydays of Russian success in evading Western sanctions might be over.
Read More: Trump Warns India of Massive Tariffs Over Russian Oil Purchases
Will it work?
The sanctioning of Rosneft and Lukoil will definitely impact the prospects of the Russian economy in a negative manner. But will it be enough to bring Putin to the negotiating table? Security analysts have long argued that Washington’s assertive stance on sanctions could cripple the Russian economy.
Though Russia has proved to be a resilient state in the face of Western sanctions as of yet, it may face more economic uncertainty as a result of additional sanctions on oil exports.
Moreover, the US Treasury Secretary, Scott Bessent, announced that the secondary sanctions will also be imposed on any third entity/person involved in business deals with the companies. This will put additional pressure not just on Moscow but also on the largest trade partners of Russian crude oil, China and India, respectively.
With the logic of capitalism favoring the US, it seems plausible that the wealthy industrialists and financial institutions in China and India stop buying Russian oil in order to secure their access to the biggest consumer market in the world. At least, this is what the United States is hoping to achieve by imposing the sanctions.
If successful, Putin will soon be reckoned with the loss of a significant amount of revenue. This will have implications for both Ukraine and Russia’s domestic political affairs. For Ukraine, it will mean less bombardment and a weaker Russia that could be pushed out of Ukraine, and as for Russia’s domestic politics, it will mean less food, less employment, and less quality of life.
Whether this additional economic pressure will halt Putin’s ambitions in Ukraine or disillusion the Russian population remains to be seen, but it will most certainly coerce Putin to rethink getting back to the negotiating table.
Muhammad Omer Rafiq
Muhammad Omer Rafiq is a student of politics with a passion for making sense of our tumultuous political world that always seems to be on the edge. He recently graduated in International Relations from Lahore Garrison University. He can be reached at muhammadomerrafiq@gmail.com
