Hello Power Up readers,
Tensions over the war in Ukraine reached a new peak after President Donald Trump imposed sanctions on Russia for the first time in his second term, targeting oil companies Lukoil and Rosneft as his frustration grows with Russian President Vladimir Putin.
This is no small escalation of the economic warfare on Moscow. The two companies produce over 5 million barrels of oil per day, more than half of Russia's total output and the equivalent of 5% of global supply. Hitting them with sweeping U.S. sanctions could therefore have significant impact on the oil market. Already, benchmark Brent Crude prices rose by 5% on Thursday to near $65 a barrel.
But, as often is the case with sanctions, things aren't that simple. Enforcing them on Indian and Chinese buyers, who account for around 75% of Russian crude purchases, will be tricky and could lead to a sharp increase in oil prices, something Trump has always sought to avoid. More on this below. Here are a few more columns and top stories from this week: |
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Geopolitics have always defined oil and gas markets and vice-versa. Europe’s shift towards renewables was in large part due to a desire to reduce its reliance on foreign fossil fuels, but it turns out, it's more complicated than that, I wrote.
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We've written a lot about shadow fleet tankers, but not in the context of Mexican drug cartels. I highly recommend this fascinating Reuters Special Report on the illicit fuel industry.
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ROI Energy Transition Columnist Gavin Maguire wrote about how demand for natural gas from the U.S. LNG industry is set to overtake residential demand for the first time.
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And ROI Asia Commodities Columnist Clyde Russell wrote from Sydney about the three top areas of concern for the global mining industry - Critical minerals, the ongoing need to decarbonise and a bigger role for governments.
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The effectiveness of President Trump’s new sanctions on Russia’s two largest oil companies will hinge on President Trump's willingness to enforce secondary sanctions and risk an energy price spike.
Oil prices gained over 5% following the announcement on the new U.S. sanctions, with traders fearing a drop in global oil volumes. Rosneft and Lukoil collectively produce roughly 5% of global oil supplies, or around 5.3 million barrels per day (bpd). Their combined exports in thus far in 2025 have accounted for 47% of total seaborne exports, according to analytics firm Kpler.
The U.S. designation of the two Russian companies, which follows Britain's decision last week to hit Rosneft and Lukoil with sanctions, cuts them off from the dollar-based financial system.
At first glance, the U.S. measures appear unlikely to have a major impact on Russian exports, given that Russian energy firm have in recent years developed efficient ways to circumvent most Western financial systems, including the use of so-called “shadow fleets”. Russian crude oil and refined product exports have only declined slightly since its invasion of Ukraine, falling from 8 million barrels per day bpd in 2022 to 7.5 million bpd in 2024. |
Graphics are provided by Reuters. |
Crucially, however, the new sanctions also expose any foreign company dealing with the two Russian firms to possible secondary U.S. sanctions. The key questions then are how India and China – the two biggest buyers of Russian crude – will respond, and whether Trump will be willing to tighten the screws on them if they don’t.
New Delhi is facing heavy pressure from Trump to reduce Russian crude purchases in exchange for a reduction in heavy U.S. import tariffs. India is therefore likely to respond swiftly to the new sanctions by cutting Russian oil imports, even if it is painful for India’s domestic refining industry.
The real test will be the reaction of China, the largest buyer of Russian crude. |
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