Serious Blow To Russian Economy

Sanctions have begun to achieve their goals.

International sanctions imposed on Russia continue to be a pressure on its energy sector. Recent reports of a decrease in the volume of purchases of Russian oil by India and China indicate that the sanctions are beginning to achieve their goals. The situation, which has developed against the backdrop of the decisions of the Biden administration and recent statements by the new Donald Trump administration, requires clarification of all the circumstances.

The Biden administration has been strengthening sanctions against Russia since 2022, aimed at limiting revenues from oil sales. However, at the end of 2024, additional tough measures were introduced. The United States announced new sanctions that hit the Russian oil refining industry; the restrictions fell, in particular, on Russian oil giants Gazprom Neft and Surgutneftegaz. Sanctions have also been imposed on an unprecedented number of oil tankers, many of them part of the “shadow fleet,” opaque traders of Russian oil, Russian oilfield service providers, and Russian energy officials. The State Department has also taken steps to reduce Russia’s energy revenues by blocking two active liquefied natural gas projects and a large Russian oil project.

In addition, the United States has actively engaged with key importers of Russian oil, including India and China, to persuade them to diversify their sources of supply. The United States has also imposed restrictions on insurance and tanker transportation services for oil that is sold at prices above a set ceiling. This has dealt a blow to Russia’s ability to use the international shipping market.

The effects of such policies are already being felt. In late January 2025, it became known that the authorities of China and India suspended the purchase of oil from Russia for delivery in March due to a sharp increase in the cost of freighting tankers that were not subject to US sanctions. It is reported that the hiring of Aframax tankers has increased by “several million dollars”. Traders note an increase in premiums for the Russian ESPO crude oil brand, which has risen in price by 3-5 dollars compared to ICE Brent. At the same time, some importers in China and India have already refused to accept tankers that fell under sanctions.

It is characteristic that the new Donald Trump administration, which took office in January 2025, confirmed its intention to continue the sanctions pressure on Russia. However, Trump set additional conditions: a decrease in the cost of Russian oil to $45 per barrel should become the basis for the start of any negotiations with Moscow. Such a policy is aimed at weakening Russia's economic stability as much as possible.

Trump also said that increased sanctions pressure should be accompanied by strategic interaction with key importers of Russian oil — India and China. It was this diplomatic work that could become one of the factors explaining the reduction in their purchases. At the same time, Trump called on OPEC countries, including Saudi Arabia, to increase oil production to compensate for the decline in supplies from Russia and stabilize the market. According to him, this will help not only reduce oil prices, but also increase economic pressure on Moscow.

One of Russia's strategies for bypassing sanctions was the creation of the so-called “shadow tanker fleet” — a group of ships that were used to transport oil without obeying international restrictions. This fleet, consisting of older vessels, often registered in countries with weakened controls, became a tool for continuing exports.

However, the pressure of sanctions has complicated the activities of this fleet. Strict measures against shipping companies and insurance brokers working with Russia have led to a reduction in the availability of services for the shadow fleet. Many tankers are reported to have been blocked in ports, and the risk of accidents due to the poor technical condition of the ships has increased.

India and China have long been the largest buyers of Russian oil, benefiting from its significant discounts. However, in early 2025, the situation changed. Insurance and transportation restrictions made it difficult to ship oil to Asia. This increased delivery times and raised transportation costs.

According to analysts, India has reduced its imports of Russian oil by 20% and China by 15% in recent weeks. This information was published in a report by the International Energy Agency (IEA) and confirmed by research by independent analytical companies such as Kpler. This move was a response to tightening sanctions and the aggravation of logistical problems associated with the delivery of oil from Russia.

Against the backdrop of Russia’s economic difficulties, Ukraine’s successful operations played a special role. The Security Service of Ukraine carried out several high-precision attacks on key Russian oil refineries in January 2025. These strikes, carried out using modern technologies, seriously undermined the production capacity and supply chains of the Russian oil industry.

The strikes reportedly caused significant damage to refineries in Central Russia and the Urals, further exacerbating the crisis in the industry. According to the Security Service of Ukraine, the attacks were carried out using high-precision means, and their results were confirmed by satellite images published in a number of international analytical publications, such as Bellingcat. These operations were not only a military but also a strategic economic success for Ukraine, as they increased the impact of international sanctions.

The reduction in purchases of Russian oil by India and China will deal a serious blow to the Russian economy. Against the backdrop of limited access to Western markets, these countries remained key buyers, compensating for the losses. Now Russia is facing an even greater reduction in export revenues.

Analysts are already predicting a budget deficit in 2025 that could exceed 3% of GDP. There are also growing problems with financing military spending and social obligations. Russia will be forced to look for new markets, which is becoming an increasingly difficult task in the context of international isolation.

The reduction in purchases of Russian oil by India and China has become an important signal that the new US Administration is continuing the policy of its predecessors to exert economic pressure on the Russian regime. This trend indicates Russia's growing economic problems and the increasing influence of international pressure on its allies. An important element of this pressure has been Ukraine's successful operations, which have further weakened the Russian oil industry. In the coming months, the key question will remain whether Russia will be able to adapt to the new realities or will be forced to make concessions in its foreign policy.

Petro Oleshchuk, Doctor of Political Sciences, Professor at the Taras Shevchenko National University of Kyiv, exclusively for the Charter97.org website

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