Recent Sanctions Actions By The United States, United Kingdom, And European Union Target Critical Russian Revenue

In a major shift in the second Trump Administration's Russia policy, on 22 October 2025 the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) imposed blocking sanctions on Rosneft Oil Company (Rosneft) and Lukoil OAO (Lukoil) under Executive Order 14024 (EO 14024).¹ This is the first designation by the Trump Administration of Russian actors under the authorities targeting Russia's continuing war in Ukraine, and follows Russia's unwillingness to commit to a peace negotiation. The action targets the primary revenue source for Russia and aims to significantly reduce purchases of Russian energy by third countries under the risk of secondary sanctions designations.

OFAC added Rosneft, Lukoil, and 34 of these companies' Russia-based subsidiaries to the Specially Designated Nationals and Blocked Persons (SDN) List. Rosneft and Lukoil, key revenue generators in the Russian economy, until now have remained subject solely to sectoral sanctions, which prohibit new medium- and long-term debt. Furthermore, the U.S. Department of the Treasury's press release for this designation reiterated that any entity that is owned in the aggregate, directly or indirectly, 50 percent or more by one or more blocked persons is itself considered to be a blocked person, even if not specifically added to the SDN List.² Both Rosneft and Lukoil have extensive networks of subsidiaries and joint ventures in third countries that can be affected by the 50% Rule, depending on their ownership.

Additionally, designations of Rosneft and Lukoil create a so-called secondary sanctions designation risk for foreign financial institutions. Pursuant to OFAC's "Updated Guidance for Foreign Financial Institutions on OFAC Sanctions Authorities Targeting Support to Russia's Military-Industrial Base" issued on 12 June 2024³ (see our policy alert here), foreign banks that conduct or facilitate any significant transaction or provide any service involving any person blocked pursuant to EO 14024 risk being sanctioned by OFAC. The related press release accompanying the designations likewise included a reference to such secondary sanctions risk.

To temporarily mitigate the consequences of these designations, OFAC issued three new General Licenses—Russia-related General Licenses 126, 127, and 128—that authorize (i) the wind down of transactions involving Rosneft, Lukoil, or their blocked subsidiaries; (ii) certain transactions related to debt or equity of, or derivative contracts involving, the same; and (iii) certain transactions involving Lukoil retail service stations located outside of Russia, respectively.⁴ These authorizations expire on 21 November 2025. OFAC also updated its General License 124A to continue to authorize all transactions related to the Caspian Pipeline Consortium and Tengizchevroil projects, even if they involve Rosneft or Lukoil. The Caspian Pipeline Consortium operates an extensive crude oil pipeline system that allows transport of oil from Central Asia to Russia's Black Sea port for further export to global buyers via tankers.

OFAC's action follows the United Kingdom's (UK) imposition on 15 October of asset freeze sanctions and trust services prohibitions against 34 Russian entities, including Rosneft, Lukoil, and many of their subsidiaries, including Nayara Energy Limited, an Indian refinery that is 49% owned by Rosneft.⁵ The UK also imposed sanctions on 51 vessels for transporting Russian oil. These vessels are now prohibited from accessing UK ports and must have any UK registration revoked. The UK designation has already caused significant ripple effects through the world energy trade due to the country's significant role in the worldwide shipping and insurance markets. The UK went a step further than OFAC by also designating Shandong Yulong Petrochemical, a Chinese refinery, as well as several port operators in China servicing the refinery. Shandong Yulong Petrochemical is reportedly China's newest refinery and one of the largest buyers of Russian oil.⁶

The European Union (EU) also ramped up its sanctions against Russia. While the EU did not impose asset freeze sanctions on Rosneft or Lukoil, it took the major step of prohibiting imports of Russian liquified natural gas in the future. On 23 October 2025, more than three months after the adoption of its most recent (18th) sanctions package, the EU unveiled its 19th sanctions package, which includes, among other prohibitions:

• Asset freeze sanctions against an additional 69 targets, including crypto providers, a Tatarstani conglomerate active in the Russian oil sector, and two Chinese refineries and an oil trader that are significant buyers of Russian crude oil;
• A ban on imports of Russian liquefied natural gas into EU ports starting January 2027 for long-term contracts signed before 17 June 2025, or starting April 2026 for short-term contracts;
• Tightened restrictions on transactions with Rosneft and Gazprom Neft;
• Asset freeze sanctions against a UAE-based company that enabled Lukoil to operate its shadow fleet and several maritime registries providing false flags to shadow fleet vessels, as well as an access ban on an additional 117 vessels;
• A ban on transactions with an additional five Russian banks and several banks from third countries that help circumvent EU sanctions;
• A ban on engagement by EU operators with the Russian National Payment Card System (Mir) or the Fast Payment System (SBP); and
• Further bans on exports of goods and services.⁷

Rosneft remains subject to an EU transaction ban with a further narrowed list of exemptions under the 19th package of sanctions. However, the EU has not imposed asset freeze sanctions on Rosneft, Lukoil, or their subsidiaries, with the exception of some subsidiaries specifically targeted under the previous rounds of designations.

Designations of Rosneft and Lukoil follow another energy-related sanctions action of the United States in which OFAC allegedly did not renew a specific license that was issued to Serbia's state-linked energy firm Naftna Industrija Srbije (NIS) earlier in 2025.⁸ That specific license reportedly authorized NIS to continue to operate through 9 October 2025.⁹ OFAC imposed blocking sanctions against NIS on 10 January 2025, due to its majority ownership by Gazprom Neft and Gazprom.¹⁰ By taking this action against Serbia's sole oil refiner, the United States signaled its resolve to start targeting anew Kremlin's sources of revenue even if this involves parties in the Western hemisphere.

The designations of two of the most important energy companies in Russia and the failure to extend an authorization to NIS highlight the current administration's willingness to use financial sanctions—a major shift in its approach toward Russia and the war in Ukraine. While President Trump has used tariffs against India for purchasing Russian oil,¹¹ these are the first financial sanctions that have been implemented against Russia since he took office in January 2025.¹²

The U.S. blocking sanctions increase the risk of continuing to purchase Russian oil for various third countries, including China, Türkiye, and India, which have been the top importers of Russian oil since Russia's invasion of Ukraine in 2022.¹³ Financial institutions that are subject to U.S. jurisdiction cannot engage in transactions related to blocked parties like Rosneft and Lukoil; non-U.S. financial institutions now will assume the risk of being sanctioned if they conduct or facilitate significant transactions related to Rosneft, Lukoil, and their subsidiaries. President Trump and Treasury Secretary Bessent mentioned that the designations of Rosneft and Lukoil are designed to achieve an "immediate cease-fire."¹⁴

The day after the designations of Rosneft and Lukoil by the United States, major Chinese oil companies—including PetroChina, Sinopec, CNOOC, and Zhenhua Oil—reportedly signaled that they will stop purchasing seaborne Russian oil, at least temporarily, due to concern over sanctions.¹⁵ It is also reported that Indian buyers of Russian oil, including Reliance Industries, one of the largest buyers of Russian oil, plan to cut or halt such purchases.¹⁶ This immediate response suggests that Russia is likely to experience a sharp decline in its energy sale revenue, which has continued to be the government's main profit generator even after the full scale invasion of Ukraine in 2022. To recapture portions of its lost revenue, Russia will continue to rely more heavily on opaque practices such as the use of a shadow fleet, front and shell companies, and alternative settlement mechanisms like bartering and crypto payments. However, the overall appetite to continue to purchase Russian oil may remain low, particularly in light of further designations by the United States, the UK, or the EU.

Footnotes

1 U.S. Department of the Treasury, "Treasury Sanctions Major Russian Oil Companies, Calls on Moscow to Immediately Agree to Ceasefire," 22 October 2025, available at https://home.treasury.gov/news/press-releases/sb0290.

2 Id. See also OFAC, "Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property Are Blocked," 13 August 2014, available at https://ofac.treasury.gov/media/6186/download?inline.

3 OFAC, "Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property Are Blocked," 13 August 2014, available at https://ofac.treasury.gov/media/6186/download?inline.

4 U.S. Department of the Treasury, "Russia-related Designations; Issuance of New and Amended Russia-related General Licenses," 22 October 2025, available at https://ofac.treasury.gov/recent-actions/20251022.

5 HM Treasury's Office of Financial Sanctions Implementations, Financial Sanctions Notice, 15 October 2025, available at https://assets.publishing.service.gov.uk/media/68efa9412adc28a81b4ad10b/Notice_Russia_151025.pdf.

6 Reuters, "UK Sanctions Russia's Lukoil and Rosneft, Targets Shadow Fleet," available at https://www.reuters.com/world/uk/uk-expands-russia-sanctions-with-90-new-listings-2025-10-15/.

7 The Council of the European Union, "19th Package of Sanctions Against Russia: EU Targets Russian Energy, Third-Country Banks and Crypto Providers," 23 October 2025, available at https://www.consilium.europa.eu/en/press/press-releases/2025/10/23/19th-package-of-sanctions-against-russia-eu-targets-russian-energy-third-country-banks-and-crypto-providers/.

8 Radio Free Europe, "Serbia Braces for Fallout After US Sanctions on Oil Firm NIS Take Force," 9 October 2025, available at https://www.rferl.org/a/serbia-oil-sanctions-nis-ofac/33555386.html.

9 NIS press release, "NIS Operations Under Sanctions of U.S. Treasury Department," 9 October 2025, available at https://www.nis.rs/en/news/nis-operations-under-sanctions-of-u-s-treasury-department/.

10 U.S. Department of the Treasury, "Treasury Intensifies Sanctions Against Russia by Targeting Russia's Oil Production and Exports,"10 January 2025, available at https://home.treasury.gov/news/press-releases/jy2777.

11 Executive Order 14329, "Addressing Threats to the United States by the Government of the Russian Federation," 6 August 2025, available at https://www.whitehouse.gov/presidential-actions/2025/08/addressing-threats-to-the-united-states-by-the-government-of-the-russian-federation/.

12 Executive Order 14329, "Addressing Threats to the United States by the Government of the Russian Federation, available at https://www.whitehouse.gov/presidential-actions/2025/08/addressing-threats-to-the-united-states-by-the-government-of-the-russian-federation/.

13 Center for Research on Energy and Clean Air, "August 2025—Monthly Analysis of Russian Fossil Fuel Exports and Sanctions," 10 September 2025, available at https://energyandcleanair.org/august-2025-monthly-analysis-of-russian-fossil-fuel-exports-and-sanctions/.

14 Wall Street Journal, "U.S. Imposes Substantial New Sanctions on Russian Oil Giants," 22 October 2025, available at: https://www.wsj.com/politics/policy/bessent-u-s-to-impose-substantial-sanctions-on-russia-84132054?mod=hp_lead_pos2.

15 Reuters, "Exclusive: China State Oil Majors Suspend Russian Oil Buys Due to Sanctions, Sources Say," 23 October 2025, available at https://www.reuters.com/business/energy/china-state-oil-majors-suspend-russian-oil-buys-due-sanctions-sources-say-2025-10-23/.

16 Reuters, "India Poised to Sharply Cut Russian Oil Imports after Sanctions, Sources Say," 23 October 2025, available at https://www.reuters.com/business/energy/indian-refiners-review-russian-oil-contracts-after-us-sanctions-source-says-2025-10-23/.

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