The fresh sanctions are expected to cost Russia billions of dollars per month if effectively enforced.

Key Takeaways:

• US imposed its toughest sanctions on Russia, targeting its oil and gas industry.
• Russian oil producers Gazprom Neft and Surgutneftegas, 183 vessels of a "shadow fleet" and other entities hit with sanctions.
• They aim to disrupt Russia’s oil trade revenue used to fuel its war with Ukraine.
• Asian refiners shift their oil purchases to the Middle East and the Atlantic Basin in response to sanctions.

On Friday, the outgoing Biden administration slapped its toughest sanctions on Russia to date, targeting more than 200 entities and individuals in the oil and gas industry and 183 vessels to cripple the Russian economy amidst its invasion of Ukraine. The new sanctions are directed at Russian oil producers, tankers, intermediaries, traders and ports. The Biden administration's sanctions have targeted not just oil producers, but also the networks that facilitate transactions.

The sanctions include restrictions on Russian oil producers Gazprom Neft and Surgutneftegas, both of which play significant roles in Russia’s energy sector. Additionally, the “shadow fleet” of 183 vessels used to evade Western sanctions, were blacklisted. These ships have been central in circumventing international restrictions by continuing to transport Russian oil to countries like India and China.

Washington has been determined to disrupt Russia's oil trade network ever since the invasion. After the European countries followed suit and imposed their own bans on Russian oil, Moscow turned to Asian markets – especially India and China – for its oil revenue.

In response to the sanctions, Indian and Chinese crude refiners have shifted their oil purchases toward the Middle East and Atlantic Basin. As reported by the Economic Times (ET), two Indian state-owned refiners acquired up to 6 million barrels of Oman and Abu Dhabi's Murban crude for February's prompt loading.

These purchases were attributed to a shortage of available Russian spot cargoes. Additionally, Indian Oil Corp. secured two million barrels of WTI Midland through a tender, according to industry resources as quoted by ET.

Meanwhile, Chinese buyers, including state-run Unipec and private refiners in Shandong, increased their imports of Angolan crude. Traders also noted that a local processor in China bought prompt supplies of Abu Dhabi oil.

The increased buying activity from both Indian and Chinese buyers is largely due to the limited and more expensive availability of Urals, ESPO, and Iranian Light crude, as well as concerns about potential sanctions on tankers transporting these cargos.

U.S. Treasury Secretary Janet L. Yellen called the sanctions a significant escalation, stressing that the measures would have “a substantial impact” on Russia’s energy revenues. Additionally, the U.S. rescinded an earlier exemption on energy payments, making it more difficult for Russian entities to conduct business with international banks.

Ukrainian President Volodymyr Zelenskiy hailed the sanctions as a critical blow to Moscow’s economy. In a post on social media platform X (formerly Twitter), Zelenskiy said, “The less revenue Russia earns from oil, the sooner peace will be restored.”

Global oil prices surged more than 3% ahead of the announcement, as traders anticipated potential disruptions in Russian oil exports. Brent crude oil prices neared $80 per barrel.