On October 23, financier and economist Oleh Penzen, in a conversation with the VeZha Civil Society Center, explained the essence of the new US and EU sanctions against Russia's major oil giants—Rosneft, Lukoil, and their subsidiaries. The introduction of these sanctions coincided with an almost $5 rise in Brent crude oil prices, which the expert points to as a clear market reaction to the new supply restrictions from Russia.
According to Penzen, markets most affected by these sanctions include India, which previously was a major recipient of Russian oil via joint ventures based there. The sanctions targeted not only the parent companies but also all subsidiary structures in which Russian firms have over 50% ownership. This makes it impossible to insure and provide banking services for transactions involving Russian oil and blocks key logistical chains and infrastructure.
Such restrictions sharply reduce Russia's ability to export oil to the global market, including to Europe, India, and Turkey. The loss of even 20% of exports to India and 7% to Turkey creates a significant gap in the Russian budget, where the oil sector is responsible for about 35% of revenues. Penzen notes these losses cannot be compensated for by domestic tax increases and threaten a substantial budget deficit for Russia.
The expert also noted that decisions on the future of the Russia-Ukraine war and sanctions policy will likely be made at meetings of US and Chinese leaders. The US and Europe can leverage vast economic ties with China to apply influence. Penzen also notes a shift in European rhetoric and policy: frozen Russian assets are increasingly used to support Ukraine, and pressure on Russia is rising, even as political shifts occur in EU countries. In summary, developments in the global oil market and Russian economy demonstrate the effectiveness of the new sanctions.
