(Bloomberg) — The most aggressive Western sanctions imposed on Russia’s oil sector since Moscow’s 2022 invasion of Ukraine threaten to disrupt global supply as buyers — led by China and India — scour the Middle East for alternative suppliers. Some estimates suggest the measures could halve Russian oil exports and their introduction has driven up Brent futures by as much as $5 a barrel in recent days.
Most Read from Bloomberg
On Jan. 10 the US Treasury’s Office of Foreign Assets Control sanctioned 161 tankers and traders involved in about 2,000 shipments since the invasion began. It also acted against Moscow-based ship insurers and two companies — Surgutneftgas and Gazpromneft — which in the first 10 months of last year accounted for almost 30% of Russia’s oil exports.
Some vessels have already come to a standstill while others are turning away from the Russian ports they were supposed to collect cargoes from, according to vessel tracking data from Bloomberg News. These erratic movements over the past week are an indication of the impact of the latest round of sanctions, said Edward Fishman, senior research scholar at Columbia University and author of an upcoming book on the use of sanctions as a form of economic warfare.
“It’s even likelier that there will be a sustained market disruption,” Fishman added. “We could see a meaningful drop in Russian exports.”
Oil traders are now asking how meaningful the fall might be?
The 161 tankers affected by the Jan. 10 measures could transport about 1.4 million barrels a day of oil according to an estimate from the London-based EA Gibson Shipbrokers Ltd. That equates to almost half of Russia’s seaborne crude exports, vessel tracking by Bloomberg shows. Macquarie Group estimates the impact could be even greater with as many as 2.15 million barrels a day of oil exports potentially lost, driving up prices. The Macquarie figure’s almost three times bigger than the global supply surplus predicted by the International Energy Agency for this year.
Additionally, oil grades that require specialist vessels are at risk of a near shutdown if Moscow can’t find workarounds, Bloomberg tracking of the sanctioned ships’ prior movements shows.
Russia has previously confounded expectations of disruption to its supply. There were widespread predictions that its flows would plunge shortly after the invasion of Ukraine as traditional buyers stepped back. Instead, flows largely held up and despite some fluctuations have done so ever since, partly due to the limited nature of the earlier rounds of sanctions which have been criticized by some.
Story continues
To carry on trading Moscow has employed a collection of so-called shadow-fleet tankers: aging vessels that often operate without known owners and insurers, flying the flags of countries deemed less-safe by the shipping industry. But the Jan. 10 measures almost doubled the number of vessels sanctioned by either the US, European Union or UK increasing it from 143 to 265.
China and India — which have bought 81% of Russia’s seaborne crude exports since the invasion of Ukraine — have always been careful to avoid breaching US sanctions up to now.
Lars Barstad, the chief executive officer of Frontline Management AS, operator of one of the world’s largest supertanker fleets, said Russia will be confronted with a months-long logistical challenge.
“This is a major disruption,” he said. “Temporarily, they will have a logistical issue, especially as China and India appear to be adhering to US OFAC listings.”
China and India go Shopping for Oil
Buyers in both Asian nations have been asking producers in the Middle East including Saudi Arabia, Iraq, the United Arab Emirates and Kuwait to provide more oil, according to officials in those countries. But finding additional barrels would be difficult given that these countries have made commitments to OPEC+ — in which Moscow is a leading force — to keep supply restrained.
In a sign of a more-urgent need for barrels, China’s state owned refiners and larger independents have been frantically seeking out crude and selected so-called prompt barrels for more-immediate loading, according to traders. It’s been a similar picture for India’s state-owned plants, a critical source of buying of seaborne Russian cargoes, they said.
Sanctioned tankers were still delivering to ports in both China and India this week but New Delhi has warned that any designated vessels will only be allowed to deliver cargoes if they were loaded before Jan. 10 and discharged no later than March 12. After that, the ships will be off limits.
Some vessels heading to collect fresh loads are starting to abandon their voyages. At least five of the 77 ocean-going crude carriers — excluding the shuttle tankers tied to specific projects — sanctioned by OFAC have abandoned the journeys they were on at the time. The Atlas, Heng Tai and Venture were all heading to the Baltic when they made U-turns off the western coast of Europe and headed toward the Mediterranean.
In the Pacific, the Himalayan and the Salty Wolf both stopped journeys to the Russian port of Kozmino on Jan. 12. The Himalayan moved to waters off China’s Shandong province where it anchored. The Salty Wolf was last seen on Wednesday heading toward Singapore.
The measures have also made tankers not targeted by OFAC wary: two unsanctioned vessels heading toward the Arctic port of Murmansk — where both storage ships and all the shuttle tankers that fill them have been designated — turned round close to the Norwegian city of Tromso shortly after the measures were announced. They are now heading for the Baltic.
The Trump Effect
Amid speculation that the incoming Trump administration could dilute the Russian measures, Scott Bessent, the nominee for Treasury secretary, said Jan. 16 that he supported dialing up the sanctions on the Russian oil industry to help bring an end to the Ukraine conflict.
“I will be a 100% on-board for taking sanctions up,” especially on Russian oil majors, he said at a senate hearing. “I believe that the sanctions were not fulsome enough.”
What will matter for oil supply is implementation and enforcement. If the measures force Russia to sell its oil at deep discounts, then the incentive to work around the sanctions will increase.
Adi Imsirovic, a veteran oil trader who has been critical of the effectiveness of Western sanctions on Russia, said the Jan. 10 measures showed that the outgoing administration had finally taken action to hurt the Kremlin.
“Biden allowed the Russians to work around the problem for two years,” said Imsirovic, who is now the director of Surrey Clean Energy. The impact of these “sanctions will depend on implementation, but they can be fairly effective.”
–With assistance from Rakesh Sharma, Yongchang Chin, Prejula Prem, Sherry Su and Tom Fevrier.
Most Read from Bloomberg Businessweek
©2025 Bloomberg L.P.