By R. Sasankan

American President Donald Trump's sanctions against Russia's oil and gas are intended to clamp down on the revenues that the Kremlin earns and ostensibly uses to finance President Vladimir Putin's war machine against neighbouring Ukraine.

The US Treasury's Office of Foreign Assets Control (OFAC) has already put out a statement claiming that the sanctions have started to bite. It claimed that the announcement of the economic sanctions against the two premier Russian oil companies "are having their intended effect of dampening Russian revenues by lowering the price of Russian oil and therefore the country's ability to fund its war effort against Ukraine."

The two biggest buyers of Russian crude are India and China. The Indian refiners have been threatened with unspecified penalties unless they wind down dealings with Rosneft and Lukoil by November 21. One of the dire threats is that these violators could be shut out from the dollar-based financial system.

Media reports suggest that a few refiners have already slowed down their offtake of Russian oil. But has that really started to hurt Russia?

The short answer is no. At least not yet.

The combined crude oil and product exports from Russia in October 2025 has been reported at 7.4 million barrels a day despite the announcement of aggressive US sanctions. At no point has Russian crude and product exports fallen by more than 0.3 to 0.5 million barrels a day.

Let us put that in context. The Ukraine war broke out in February 2022. Before the war, Russia was exporting 4.78 million barrels of crude and 2.2 million barrels of products. In 2023, crude exports fell to 4.59 million barrels a day and product exports slid to 1.9 million barrels a day. In 2024, crude exports were up to 4.8 million barrels a day. In the first half of 2025, Russian oil exports were down to 4.3 million barrels a day.

Curiously, India has started to feel the heat of the US sanctions against Russia. Price-discounted Russian oil accounts for 37 per cent of India's oil import basket. India's refiners have already begun the process of bringing down their Russian oil imports fearing US sanctions against them. This could exacerbate early next year when the European Union ban on import of petroleum products made out of Russian crude kicks in on January 21 next year.

Reliance has been India's largest buyer of Russian oil, accounting for nearly half of all imports. "We have stopped importing Russian crude oil into our SEZ refinery with effect from November 20," a spokesman for Reliance Industries recently said. "From December 1, product export from the SEZ refinery will be obtained from non-Russian crude oil. This transition has been completed ahead of schedule to ensure full compliance with product-import restrictions coming into force on 21 January 2026."

"All pre-committed liftings of Russian crude oil as of October 22, 2025, are being honoured, considering all transport arrangements were already in place," the company said, adding that the final such cargo was loaded on November 12. "Any (Russian) cargoes arriving on or after November 20 will be received and processed at our refinery in the domestic tariff area (DTA)," the statement added.

Days before this event, Reliance snapped up 1 million barrels of Kuwaiti crude after Kuwait Petroleum unexpectedly put volumes on the spot market. Reliance has also been hoovering up Middle Eastern grades ever since sanctions talk intensified. Commentators will be looking closely at these developments as India's biggest refiner starts to scout for Middle Eastern sources of crude.

Reports also suggest that besides Reliance Industries, Bharat Petroleum, Hindustan Petroleum, Mangalore Refinery and Petrochemicals and HPCL-Mittal Energy have also halted direct purchases from the two Russian energy companies. Together, they previously bought around 1 million barrels per day of Russian crude.

If the US sanctions had started to bite, the Russian economy should have started to falter. It hasn't. One reason for this is the fact that global energy demand has remained robust. Global demand growth has shown little signs of flagging after recording an annual growth rate of 1.1% in 2023 and 2024.

The Ukraine war, which broke out in February 2022, virtually shook the international crude market. Crude oil prices went up by roughly 50 per cent, LNG prices surged by 500 per cent or more even as the war disrupted supply chains and created market uncertainty for Europe which was heavily dependent on Russian gas.

The Ukraine war continues to rage. Yet, none of the world leaders have made any serious effort to stop the conflict. Oddly enough, global crude prices have started to fall now - not because of the war or the US sanctions against Russia but certain other factors.

Experts have trotted out a variety of reasons for the fall in global crude prices, some of which have been way off the mark. Many have tended to ignore the fact that US crude production since 2022 has been up by at least 0.4 million barrels a day. And, in Venezuela, crude output has steadily risen from 0.724 million barrels a day in 2022 to around 1 to 1.1 million barrels a day in October 2025. Relative to 2022, even OPEC output was up by over 0.6 million barrels a day by June 2025. So the softness in crude prices that we are witnessing is primarily driven by higher production outside Russia and possibly subdued demand in 2025.

The latest development affecting the oil market is the stockpile data. According to latest media reports, crude oil prices traded defensively as bearish fundamentals overshadowed short-term risk catalysts. The most immediate bearish catalyst came from U.S. stockpile data. The Energy Information Administration (EIA) reported a massive 6.4 million barrel build in domestic crude inventories for the week ending November 7, far exceeding analyst expectations of a 1.96 million barrel increase. The American Petroleum Institute (API) had earlier flagged a 1.3 million barrel build, but the EIA's number confirmed growing concerns about a supply glut.

But there was a wobble in the week immediately after, suggesting that volatility still prevails. Latest data from the U.S. Energy Information Administration (EIA) released on November 19 shows that crude oil inventories in the United States decreased by 3.4 million barrels during the week ending November 14, after gaining 6.4 million barrels in the week prior. The increase brings commercial stockpiles to 424.2 million barrels according to government data, which is 5% below the five-year average for this time of year.

The stockpile data has triggered a sharp selloff in crude that pushed the West Texas Intermediate (WTI) more than $2 lower on Wednesday. The inventory build also highlighted a broader trend across global storage hubs, with reported increases in Europe, Singapore, and the UAE's Fujairah, signalling barrels are increasingly struggling to find end demand. OPEC and IEA acknowledge 2026 Supply Surplus.

In its latest Short-Term Energy Outlook, the EIA says: "We expect global oil inventories to continue to rise through 2026, putting downward pressure on oil prices in the coming months. We forecast the Brent crude oil price will fall to an average of $54 per barrel in the first quarter of 2026 (1Q26) and average $55/b for all of next year. Although we continue to expect crude oil prices to fall in the coming months, our Brent forecast for 2026 is $3/barrel higher than in last month's outlook, largely as a result of updated assumptions about inventory builds in China and sanctions on Russia."

Obviously, there are swift-moving developments in the crude and petroleum markets and it will take some time before the uncertainties dissipate. It is still too early to certify that the US sanctions have achieved their desired objective till the OFAC spells out how President Trump intends to choke off Russian supplies to China.