US Treasury Sanctions against Russia: what effects will they have?

On 22 October 2025 the US Treasury announced sanctions under Executive Order 14024 targeting Rosneft and Lukoil, described as “Russia’s two largest oil companies”.  The rationale: these companies operate in the energy sector of the Russian Federation economy, and thus contribute to state revenue and — as the Treasury states — to the war-effort of the Russian government. The companies plus a number of their Russian-based subsidiaries are now designated, and all entities that they own 50% or more (directly or indirectly) also are blocked even if not individually named. 

Here we will examine the global economic effects of these sanctions on Rosneft and Lukoil — in terms of revenue, operations, global trade, capital markets, and secondary impacts — and then assess likely or existing evasion techniques and counter-measures.

Economic Effects Worldwide

1. Revenue and crude/oil-product export disruption

By targeting Rosneft and Lukoil, the US hopes to choke a major stream of revenue flowing to the Russian state and its energy sector. Since both firms are vertically integrated (exploration, production, refining, transport, sale) in Russia and internationally, the sanctions could reduce their ability to market oil and gas abroad, hinder partnerships, and raise costs. 

For example if Western buyers reduce purchases of their crude or refined products because the sellers are sanctioned (or because trading and insurance become riskier), then global export volumes from Russia via these firms might decline. That in turn could reduce global supply, putting upward pressure on world oil prices (especially if alternative supply cannot immediately fill the gap) — which in fact some commentary suggests is happening: “Oil Prices Surge as US Hits Russia With News Sanctions”. 

Therefore globally, consumers in importing countries may face higher fuel costs, while Russia loses export revenues.

2. Capital markets, financing and investment

The designation means US persons are generally prohibited from dealing with the blocked entities, and any property or interest in property of the designated or blocked persons in the US or under US persons’ control must be blocked. 

Thus Rosneft and Lukoil face constrained access to US capital markets, US bank financing, likely higher cost of borrowing, and increased risk premium from international investors. This could reduce their ability to raise funds for new projects, especially overseas or in partnership with Western firms. Over time this may reduce investments in upstream/deep-water/Arctic projects, which are more capital-intensive and rely on global finance.

3. Global supply chains and trade partners

Because both firms have international operations (for example Rosneft has joint ventures and subsidiaries abroad) the sanctions may ripple into global supply chains: foreign counterparties may reduce risk of dealing with sanctioned firms/subsidiaries, or banks and insurers may withdraw support.

Also global oil buyers might shift sourcing away from Russia (via Rosneft/Lukoil) to other suppliers — for example Middle East, the USA, Africa — changing trade flows, shipping patterns, refining usage globally. That adjustment will take time and could incur cost.

In addition shipping, insurance and logistics may become more expensive for Russian exports via those companies — raising overall costs for global purchasers of Russian crude from those firms, potentially reducing competitiveness.

4. Domestic Russian economy & multiplier effects

For Russia, Rosneft and Lukoil are major pillars of the energy sector and significant taxpayers, employers and export earners. Impairing them will weaken Russia’s capacity to generate foreign currency, reduce the tax and dividend flows to the state, and raise macroeconomic stress (weaker rouble, higher inflation, reduced public investment).

Globally, a more unstable Russian economy poses risks: investors with exposure to Russian debt or equity may face losses; global energy markets may see increased volatility; countries dependent on Russian hydrocarbons might face supply risk and will need to adjust quickly.

5. Secondary or knock-on effects

• Financial institutions globally may reassess risk and cut exposure to Russian energy, which could lead to broader de-risking, capital flight from Russia, and higher risk premiums for other Russian firms.

  
  

• Countries still importing Russian oil via alternative channels may face reputational or secondary sanctions risks, which might prompt them to diversify away from Russian supply, altering long-term geopolitics of energy (e.g. increased reliance on Middle East, North Africa, the USA and the Gulf).

  
  

• Shipping/insurance companies and trading houses that facilitate Russian oil will face greater scrutiny, increasing transaction cost and complexity globally. As a consequence of reduced Russian supply (via sanctioned firms) global supply might tighten, benefiting other producers, but also raising cost for consumers.

Evasion Techniques: Existing and Potential

Sanctions regimes often spur innovative evasion methods. Some of these are already observable in relation to Russian energy, and others may be adopted or scaled up in response to the new sanctions.

Existing/observed evasion methods

• Use of “shadow fleet” shipping: Vessels that are unattributable, re-flagged, use obscure owners, turn off tracking, or carry cargoes via ship-to-ship transfers to obscure origin/destination. While this has already been especially noted in the context of shipping Iranian and Russian oil, it is relevant here. 

  
  

• Use of opaque trading companies registered in jurisdictions with weak disclosure, shell companies or front entities that buy Russian crude (sometimes above price-cap) and then resell, disguising origin or value. For example, the Dubai-based firm 2Rivers Group (formerly Coral Energy) has been reported as enabling large volumes of Russian crude export via such methods. 

  
  

• Use of barter arrangements or non-dollar transactions: In order to circumvent exclusion from US dollar-clearing, Russia may use other currencies (ruble, yuan, rupee), or use pre-payment, offset arrangements, or local currency settlement to keep exports flowing.

  
  

• Transferring ownership or control to non-Russian entities: Entities may be spun off, ownership hidden behind complex structures, or new “friendly” jurisdictions used to give an appearance of independence from sanctioned firms.

  
  

• Triangular trade: Russian crude may be sold to an intermediary trading house or via third-country refiners and then re-exported to final consumers — thereby reducing the direct link between the sanctioned firms and end-buyer.

  
  

• Insurance and certification alternatives: Since many vessels shipping Russian oil under sanctions lose access to major insurance or classification societies, alternative Russian-dominated insurers and flagging regimes may be used (e.g. domestic Russian insurers or friendly friendly states) to keep shipments afloat. The ability to bypass Western insurers raises costs but enables continuance of exports.

Potential/more advanced evasion techniques given the new sanctions

• Sub-subsidiaries and affiliate chains: Given that Rosneft and Lukoil have many subsidiaries, some of which may not be individually designated, there may be attempts to route transactions via a non-designated entity owned <50 % or in affiliate relationships, banking on ambiguity around “control” rules. Enforcement will need to trace complex ownership webs.

  
  

• Use of non-traditional financing vehicles: for example, tokenisation of assets or use of crypto-assets to move value, circumventing banks. The US has already targeted firms for such activities in the Russia sanctions context (e.g. fintech firms tokenising commodities). 

  
  

• Re-flagging and re-naming shipping assets: ships that previously transported sanctioned oil might be renamed, have ownership changed or be reflagged under different low-visibility jurisdictions; cargoes might be disguised in manifest or via blending with non-Russian crude to camouflage origin.

  
  

• Domestic Russian self-insurance / self-transport regimes: Russia may increasingly shift away from Western insurance/transport infrastructure to her own or friendly states’ systems to keep exports flowing despite higher costs.

  
  

• Price discounting or “shadow” pricing: the sanctioned firms may offer large discounts or under-the-radar deals (e.g. off-market bids) to buyers willing to take higher risk, thereby preserving volume albeit at lower margins — but global tracking of “official” prices versus actual may be murky.

Implications and Outlook

The sanctions present a significant challenge to Rosneft and Lukoil and, by extension, to the Russian state’s energy-revenue base. However much depends on enforcement, partner-state behaviour, and the ability of Russia and her partners to implement evasive or adaptive strategies.

Globally, energy markets may see increased volatility, with shifts in trade flows and buyer-seller relationships. Producers in the Middle East, Africa or the Americas may benefit. Financial institutions will have to reassess exposures.

In the medium to longer term, if Rosneft and Lukoil’s output or export volumes decline materially, this could accelerate Russian energy sector contraction, forcing Russia to rely more heavily on domestic consumption or non-Western markets (China, India, Middle East) under less favourable terms.

On the evasion side, the sanctions will raise costs for Russia and her energy firms (higher shipping/insurance/financing costs, narrower buyer base); but the existence of evasion networks means the effect will not be immediate or total. The US and her allies will need to monitor shipping/trading networks, enforce secondary sanctions, track complex ownership structures, and ensure coordination with other countries to prevent leakage.

If major Russian volumes simply shift away from Western-linked infrastructure to grey-market channels, the global impact may still be material — but the Russian firms may mitigate some losses by absorbing higher costs, accepting lower margins, or shifting buyers.

Conclusion

We do not yet know precisely what the consequences of these new sanctions will be. It often takes a while to assess the effect of any new sanctions regime. There is no economic model that can take into account all the relevant factors considered here.

Nevertheless the US Treasury’s designation of Rosneft and Lukoil — and their subsidiaries — marks a significant escalation in pressure on Russia’s energy sector. Worldwide economic effects include disruption to export revenues, higher risk and cost for global oil trade, capital-market constraints, supply-chain shifts, and macroeconomic stress in Russia. Evasion techniques are already active (shadow fleets, opaque traders, third-country intermediaries) and are likely to expand in sophistication. The ultimate impact will depend on how rigorously sanctions are enforced, how Russia adapts, and how other countries respond. In short: the sanctions raise the cost of Russia’s hydrocarbon commerce, but they do not guarantee an immediate collapse; over time, the pain will likely grow if enforcement holds and sanctions evasion techniques do not scale sufficiently.