The initial sanctions imposed by the United States on Russia following Donald Trump’s reinstatement as president are aimed at the nation’s two largest oil companies, potentially impacting global energy markets.

These sanctions empower the U.S. to exert considerable pressure on the foreign branches of Rosneft and Lukoil and dissuade international partners from engaging in business with them.

Trump has consistently advocated for a reduction of Russian oil exports to its two major buyers, China and India, to heighten economic pressure on the Kremlin and strengthen the U.S. position in any potential negotiations regarding the conflict in Ukraine.

Here’s an overview of the anticipated effects of these sanctions:

**What will become of Russia’s international energy assets?**

The new sanctions introduce significant challenges for Russia’s overseas energy operations and may disrupt international trade.

On Monday, Lukoil announced plans to divest its international assets, which account for about one-third of the company’s overall operations, in response to these sanctions.

Lukoil’s primary foreign investment is a 75% stake in the West Qurna-2 oilfield in Iraq, along with minority interests in gas and condensate projects in Kazakhstan and Azerbaijan, as well as full ownership of refineries in Bulgaria and Romania.

Rosneft’s key foreign asset consists of a 49% stake in Nayara Energy in India, which operates the Vadinar refinery, the third-largest in the country, contributing around 8% to national refining capacity. The company has yet to clarify the fate of this investment.

Due to the minority stakes held by both companies in various foreign projects, the projects themselves may escape direct sanctions, according to Sergei Vakulenko, a former Russian oil executive and senior fellow at the Carnegie Endowment for International Peace.

Nonetheless, he noted that the sanctions could render it “virtually impossible” for these sanctioned entities to receive dividends and could complicate relationships with suppliers, financial institutions, and other partners.

**What about Russian oil exports?**

India’s imports of Russian crude have surged from just 50,000 barrels per day in 2020 to approximately 1.8 million barrels per day in the first half of 2025, trailing only behind China at 2 million barrels per day.

Earlier this year, Trump enforced a 25% tariff on India’s Russian oil purchases, signaling that New Delhi might need to reduce these imports.

Although the sanctions on Rosneft and Lukoil won’t take effect until November 21, India’s largest private refiner, Reliance Industries, has already indicated that it will “adjust refinery operations to comply with the new regulations.”

Other Indian refiners are reportedly halting imports until further instructions are issued.

Nayara Energy, where Rosneft is the main stakeholder, has so far refrained from making any comments regarding the sanctions.

India’s situation is particularly precarious due to limited alternative payment options if the U.S. inhibits dollar- and dirham-based transactions, as noted by Alexei Gromov of the Moscow-based Energy and Finance Institute.

Moscow has expressed concerns regarding the non-convertibility of Indian rupees, which makes local currency settlements impractical. Furthermore, trade volume between Russia and India is insufficient to support a barter system akin to Russia’s reported arrangements with China.

**Will India shift its strategy?**

Analysts predict that India may scale back its Russian crude imports under U.S. pressure, but will likely not eliminate them entirely.

India has the option to replace Russian oil with supplies from the Middle East, Latin America, or the U.S., according to Kpler analyst Sumit Ritolia. It is estimated that OPEC nations have over 3 million barrels per day of spare capacity available, which could help fill any shortfall.

Whether India is prepared to forgo discounted Russian oil remains uncertain.

In September, Russia’s Urals blend traded at roughly a $5-per-barrel discount to Brent, but reports indicate that this effective discount narrowed to between $2 and $2.50 in October. Substituting these volumes with oil priced at market rates could lead to an annual increase in India’s import expenses by $1.5 billion to $3 billion.

“To effectively influence India, Washington must maintain availability of alternative supplies while also clearly communicating that its recent sanctions present a real threat of secondary sanctions,” said Maximilian Hess, founder of Enmetena Advisory and a fellow at the Foreign Policy Research Institute.

The U.S. could potentially target Russian interests in India by joining European sanctions on the Vadinar refinery, he noted.

Ritolia suggested that he anticipates a “token reduction” of 100,000 to 200,000 barrels per day from India as a symbolic gesture of diversification.

Carnegie’s Vakulenko expressed that India is likely to reduce volumes rather than entirely cease imports, particularly considering the administrative hurdles facing the Trump administration amid the potential implications of the U.S. government shutdown.

**What does this imply for the Russian economy?**

Rosneft produces approximately 5.2 million barrels of oil daily, representing around 40% of Russia’s overall output, while Lukoil contributes roughly 1.6 million barrels.

Following the sanctions announcement, Lukoil’s stock price fell from 6,000 rubles on October 22 to about 5,434 rubles by Monday, marking a decline of nearly 9.4%. Over the same timeframe, Rosneft shares decreased by around 7%, from 402 rubles to 374 rubles.

Should India indeed cut back, Russia might experience a significant revenue shortfall that compels the Kremlin to either increase taxes or reduce spending to balance the projected budget for 2026.

While China may absorb some of the excess, it remains uncertain if it can accommodate all of it, Hess pointed out.

There is a precedent for such a situation; when India curtailed its purchases in August, Chinese refiners reportedly took on approximately 15 additional cargoes of Russian crude for October and November deliveries, according to Reuters.

However, sustained U.S. pressure could compel Moscow to offer steeper discounts of 20-25% below Brent or increase payments to intermediaries, ultimately reducing long-term export revenue, according to Grigory Sosnovsky, director of the Moscow-based N1Broker firm.

If demand does not rebound elsewhere, Russia may be forced to curb production due to limited storage capacity, cautioned Carnegie’s Vakulenko.

A long-term decline in export volumes, without a corresponding rise in prices, would make fulfilling the 2026 budget increasingly challenging, he added.

Predictions indicate that Russia’s oil and gas revenues will reach 8.7 trillion rubles ($91.6 billion) this year, the lowest since 2020.

The proposed budget for 2026 anticipates a slight increase to 8.9 trillion rubles ($93.7 billion), with overall federal revenue rising from 36.5 trillion rubles ($384 billion) in 2025 to 40.3 trillion rubles ($424 billion).

Energy revenues constitute approximately 25% of total budgetary income, but any decrease in oil earnings could have reverberations throughout the broader economy, negatively impacting corporate tax and VAT revenues, which are Russia’s main sources of non-energy revenue, according to Vakulenko.