“Hellish sanctions” will hit Russian oil in 2027

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, gave an interview to the online portal “Oil and Capital” about the possible impact of the “hellish” US sanctions on the short- and medium-term prospects for Russian oil and gas exports.

The most important question is: what can we expect from Asian countries? Will they agree to the new restrictions?

— If the US starts waving the “sanctions club” again, it will primarily irritate India and China. Beijing has long demonstrated that it knows how to pragmatically resist American pressure: since 2018, it has been the only country that continues to buy Iranian oil despite the sanctions.

India is more dependent on the US and will reduce its purchases of Russian oil at any convenient opportunity in order to avoid the risk of secondary sanctions. But not right now. Russia accounts for approximately 45–50% of India’s oil imports, and there is no equivalent replacement on the market.

Therefore, Delhi has stated quite firmly, albeit diplomatically, that energy security will remain a priority, and the geography of supplies will be determined by it, not by Washington’s decisions.

Will the US authorities take full advantage of the opportunities this law provides them?

— Trump has already used the tariff “club” against India, accusing it of excessive purchases of Russian oil. True, as it turned out, the scale was modest — the impact was minimal. Back then, New Delhi increased its imports of American oil and temporarily reduced Russian supplies. Now India won’t be able to repeat this on the same scale.

At the same time, the law allows the president to issue exemptions — so‑called waivers — for goods that are important for U.S. national security. Theoretically, most of the imports from India and China that the Americans need could be exempted from sanctions. Therefore, the loud statement about 100 % duties does not necessarily mean that they will actually be applied to the entire trade turnover. The devil, as always, is in the details.

How will the “hellish sanctions” affect the States themselves?

— This law was adopted at a very inopportune time: the Middle East crisis shows no signs of abating, and reserves of oil and petroleum products are dwindling. Because of this, even in the USA, prices for motor fuel, primarily diesel, have reached record levels.

What makes the situation worse is that Washington is not even considering the possibility of imposing even a temporary ban on diesel fuel exports to stabilize prices on the domestic market.

Let’s imagine that pressure on China and India from the United States continues and real restrictions are imposed. What will the consequences be?

— In the most likely scenario, the Middle East crisis will last at least until the end of the year. The artificial oil shortage will persist or even intensify, so China and India will try to keep Russian supplies at the maximum level. Otherwise, they will have to introduce strict restrictions within their economies, similar to those during the COVID‑19 pandemic. Given the current level of tension, I do not expect a noticeable reduction in Russian oil exports: they will remain at roughly the current level.

A negative scenario is possible if the crisis in the Strait of Hormuz ends. Middle Eastern countries will quickly increase oil production and sales to compensate for the losses, and exports from Latin America (Guyana and Brazil are developing rapidly) and Africa (Uganda should become an exporter by the end of the year) will continue to grow.

The market will face a surplus of raw materials, and prices may drop to $70 and then to $60 per barrel of oil. Buyers will have the opportunity to choose raw materials that are not burdened by sanctions risks. In my view, such a scenario is unlikely before the second quarter of 2027.