Trump Administration Drastically Escalates Russian Energy Sector Sanctions Alongside U.S. Allies

On October 22, 2025, amidst increasing pressure from Congress and after the cancellation of a planned summit between U.S. President Trump and Russian President Putin in Budapest, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed blocking sanctions on Russia’s two largest oil companies. This action follows a series of failed attempts by President Trump to broker peace in Ukraine and increasing Trump Administration frustration regarding Russia’s continued aggression and President Putin’s unwillingness to agree to a ceasefire.

The October 22 action is notable as the first Russia-related sanctions imposed under the second Trump Administration and represents a significantly enhanced effort to pressure Russia to the negotiation table. Although the Trump Administration has maintained the extensive Biden-era sanctions on Russia over its first nine months, President Trump had previously not imposed additional sanctions as he attempted to broker a deal between Russia and Ukraine. The October 22 action is also notable as it appears to have been coordinated or at least imposed concurrently with allies, including the UK and EU, even in the midst of a U.S. government shutdown.

The escalation of sanctions comes amongst mounting pressure from the U.S. Congress. Immediately prior to the announcement of the October 22 action, the U.S. Senate Foreign Relations Committee voted to approve three bills designed to increase pressure on Russia, including legislation that would designate Russia as a State Sponsor of Terrorism, improve the implementation of the seizure of Russian sovereign assets for the benefit of Ukraine, and authorize new sanctions against Chinese entities helping to support Russia’s war in Ukraine.

In issuing the October 22 action, Treasury Secretary Scott Bessent underscored that the United States stands ready to take additional actions if necessary to bring an end to the war. Notably, President Trump has indicated a willingness to remove the sanctions if a deal could be reached to end the war. Given the extensive reach of the newly designated Russian oil companies throughout the global energy markets, the new sanctions are expected to have a material impact on the Russian energy sector.

I. New U.S. Energy Sector Sanctions

On Wednesday, OFAC designated Open Joint Stock Company Rosneft Oil Company (Rosneft), Lukoil OAO (Lukoil), and a number of Russia-based Rosneft and Lukoil subsidiaries pursuant to Executive Order (E.O.) 14024 for “operating or having operated in the energy sector of the Russian Federation economy.” Previously, Rosneft and Lukoil had only been targeted with certain restrictions related to the exploration or production for deepwater, Arctic offshore, or shale projects under Directive 4, E.O. 13662, and, in the case of Rosneft, debt and equity-related restrictions under Directive 2, E.O. 13662. The October 22 action imposed blocking sanctions on Rosneft, Lukoil, their listed subsidiaries, as well as any entity owned 50 percent or more, directly or indirectly, by Rosneft, Lukoil, and their designated subsidiaries (the Blocked Entities). Effective immediately, transactions by U.S. persons, within or transiting the United States, or that otherwise have a U.S. nexus involving the Blocked Entities or their property or interests in property are prohibited, unless exempt or authorized by OFAC. U.S. persons must also block and report to OFAC all property in their possession or control in which the Blocked Entities have a property interest.

Concurrent with the designation action, OFAC published several general licenses authorizing certain activities related to:

• Winding down transactions with the Blocked Entities, provided payments to the Blocked Entities are made into a blocked account (see General License No. 126);
• Divestment or transfer of debt or equity issued or guaranteed by the Blocked Entities to a non-U.S. person, and certain other transactions related to debt or equity of, or derivative contracts involving, the Blocked Entities (see General License No. 127);
• Purchases of goods and services from, and the maintenance, operation, or wind down of, Lukoil retail service stations located outside of Russia (see General License No. 128); and
• The Caspian Pipeline Consortium or Tengizchevroil projects (see General License No. 124A, an existing general license that was amended to cover certain dealings with the newly Blocked Parties).

General Licenses 126, 127, and 128, which allow U.S. persons to wind down certain transactions involving the Blocked Entities, are in effect until 12:01 a.m. EST, November 21, 2025. U.S. persons with exposure to these Blocked Entities should quickly evaluate whether they anticipate needing additional time to wind down operations or positions involving the Blocked Entities and should consider requesting a license immediately if additional time would be required to wind down activity involving these entities, particularly in light of the fact that OFAC is operating with more limited capacity during the government shutdown.

The October 22 action additionally has secondary sanctions implications for those engaging in transactions involving the Blocked Entities outside of the United States. Under E.O. 14024, as amended by E.O. 14114, foreign financial institutions that conduct or facilitate significant transactions or provide any service involving the Blocked Entities risk being sanctioned by OFAC, a point explicitly noted in Treasury’s press release announcing the designations. Furthermore, the sanctioning of the Blocked Entities compounds existing pressures, especially for India, which already suffers from a 50 percent tariff imposed by the United States. After the announcement of new sanctions, Indian refiners indicated an intent to curtail Russian oil imports.

II. New UK and EU Energy Sanctions

The U.S. action to designate Rosneft and Lukoil appears to have been taken in coordination or at least concurrently with key allies that have also imposed significant sanctions on Russia’s energy sector.

United Kingdom

On October 15, 2025, the UK implemented a raft of sanctions aimed at “taking Russian oil ‘off the market’,” including by targeting Rosneft and Lukoil with asset freeze sanctions and adding such entities to the UK’s sanctions list. Other measures introduced targeted multiple vessels in the so-called ‘Shadow Fleet’ that continue to transport Russian oil, and various Chinese, Indian, and Emirati entities that enable the trade of Russian oil globally, such as oil terminals and refineries. These latest measures follow the designation of Russia’s third and fourth largest oil companies, Gazprom Neft and Surgutneftegas, in January 2025.

European Union

On October 23, 2025, the EU published its 19th EU Russia Sanctions Package (19th Package). The 19th Package comprises a variety of additional restrictions, including a ban on the purchase and import of Russian liquefied natural gas effective April 25, 2026, except for long-term contracts concluded before June 17, 2025, which will apply starting from January 1, 2027. The 19th Package also significantly broadens the transaction ban against Rosneft and Gazprom Neft by way of removing exemptions that had allowed the import of natural gas and oil products into the EU.

In addition to these energy-specific prohibitions, the 19th Package (i) added restrictions on connecting to any financial messaging system operated by a Russian legal entity; (ii) added additional service restrictions, including an authorization requirement for any services to the Russian government (unless otherwise prohibited) and certain artificial intelligence services to entities in Russia or the Russian government; (iii) expanded export restrictions to cover a broader range of goods and technologies; (iv) made additions to the EU sanctions list, including ships and banks; and (v) imposed corresponding financial, trade, and service-related restrictions against Belarus.

While the issuance of the 19th Package coincides with the first U.S. sanctions actions on Russia in the second Trump Administration, it had been prepared for some time independently from the U.S. actions and is already the fourth package adopted by the EU in the course of 2025. It can be viewed as another step of the continued efforts by the EU to prevent Russia from getting access to technologies it uses in its war against Ukraine and to reduce Russia’s revenues stemming from the supply of energy and other goods.

III. Conclusion

These significant Russia sanctions – to increase pressure on Russia and impose further costs for its war in Ukraine – mark a shift in the Trump Administration’s approach to date and reflect President Trump’s growing frustration over President Putin’s unwillingness to bring an end to the war in Ukraine. Whether we see a continued ratcheting up of sanctions on Russia or a shift in policy toward sanctions relief will likely depend upon Russia’s willingness to agree to a ceasefire and end the war in Ukraine or take other action to mollify President Trump. In the meantime, companies should assess exposure to the Blocked Entities under all relevant sanctions regimes and prepare for potentially rapid shifts in the Russia sanctions landscape after an extended period of status quo maintenance. In addition, companies with exposure to or assets in Russia should closely monitor for and anticipate potential developments in Russian countersanctions, given the dramatic escalation of Western sanctions on Russia.

The MoFo National Security team stands ready to aid companies in assessing risks related to these sanctions and answer any compliance questions spurred by these developments.