US Mulls Rosneft, Lukoil Sanctions if Putin Balks on Ceasefire
(Bloomberg) -- The US is weighing the threat of sanctions against Russian oil companies Rosneft PJSC and Lukoil PJSC as part of a menu of options to push President Vladimir Putin to accept a ceasefire with Ukraine, people familiar with the matter said.
Sanctions on the two Russian oil majors would aim to squeeze the Kremlin’s energy revenues if Friday’s summit between President Donald Trump and Putin in Alaska fails to make progress, according to the people, who asked not to be identified discussing private deliberations. With concerns about the impact on prices, officials say the hope from Trump is that such a move — if taken — would be short-lived.
Other possibilities include more restrictions on Moscow’s shadow fleet of oil tankers and additional tariffs on buyers of Russian oil, including China. The people cautioned that implementation of any measures could be gradual. Trump has previously indicated he prefers tariffs to sanctions, as he finds them more effective.
The US Treasury didn’t immediately respond to a request to comment.
State-controlled Rosneft, headed by Putin’s close ally Igor Sechin, and privately held Lukoil are the two largest Russian oil producers, jointly accounting for nearly a half of the nation’s total crude-oil exports, or around 2.2 million barrels a day in the first half of this year, according to Bloomberg estimates.
The threat of further sanctions is part of US negotiating tactics coming into the summit to show the administration is willing to ramp up pressure on Russia. It’s in Trump’s style to dangle economic tools as carrots and sticks.
Asked on Fox Business Network about possible sanctions against China, Treasury Secretary Scott Bessent said “everything is on the table.”
Trump has already doubled levies on India to 50% over its purchases of Russian oil, a move that some of the people said helped nudge Putin to the negotiating table. And he has repeatedly threatened unspecified sanctions on Russia, as recently as this week.
“There will be — I don’t have to say — there will be very severe consequences,” Trump told reporters at the Kennedy Center on Wednesday.
Even so, Trump has repeatedly backed away from threats of tariffs, sanctions and other punishments in the past. On July 29, he gave Russia 10 days to reach a truce with Ukraine. But the Aug. 8 deadline came and went without further action by the US leader.
Trump said in an interview with Bret Baier on Friday that if the meeting with Putin at a US military base in Anchorage does not go well, “I would walk,” according to Fox News.
The possible measures come against the backdrop of an oil market that the International Energy Agency says will see a record surplus next year. While that could leave room for some supplies to come off the market without prices spiking, Russia is one of the world’s largest crude producers and the threat of disruption to its output would add a fresh dose of geopolitical risk.
Then President Joe Biden held back from sanctioning Russian oil majors when the 2022 war started amid concerns about the impact on US gas prices as his administration sought to control a surge in inflation.
The US and its Group of Seven allies opted to impose a price cap on Russia’s oil exports in 2022 in part because of the concerns that crude prices would spike. Brent futures touched $139 a barrel in the days after the war erupted but today they are trading closer to $70.
In January, the outgoing Biden administration imposed sanctions on Surgutneftegas PJSC and Gazprom Neft PJSC, which rank as the third- and fourth-largest Russian exporters respectively. But Asian markets, now the main buyers of Russian oil, have largely ignored the restrictions, keeping robust demand for the sanctioned barrels. As a result, Moscow’s crude exports so far this year remain stable, according to Bloomberg calculations based on ship-tracking data.
Trump sees any kind of ceasefire in Ukraine as a key objective of the talks. En route to Anchorage early Friday, he didn’t rule out that Ukraine might get some form of security guarantees from western nations, or that it might have to agree to swap land with Russia. But he said it wasn’t his place to decide.
“I’ve got to let Ukraine make that decision,” Trump said of the idea of the two countries trading land. “And I think they’ll make a proper decision. But I’m not here to negotiate for Ukraine. I’m here to get them at the table.”
A peace deal between Russia and Ukraine could see sanctions on Moscow eased, Bloomberg has previously reported.
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