The United States’ efforts to persuade India to stop buying Russian oil have been unsuccessful, prompting Washington to resort to sanctions. The US Treasury Department has imposed sanctions on Russian oil majors Rosneft and Lukoil, aiming to choke off the Kremlin’s revenue stream. However, this move is likely to have limited impact, as Russia will not easily bow to pressure and the global oil market will adjust to the new restrictions.

The effectiveness of the sanctions will depend on how rigorously the US enforces them, particularly through secondary sanctions on entities that deal with Russian oil. Nevertheless, past experience suggests that Washington may not be able to sustain a tough stance, as markets will push back to avoid a price spike. A gray-zone equilibrium may emerge, where Western politicians appear tough on Russia while avoiding destabilizing the global market.

Reports indicate that some Indian refiners plan to reduce their purchases of Russian oil, while Chinese state-owned oil companies are suspending imports. However, it is unlikely that these sanctions will be the final word on the matter. India’s Commerce Minister, Piyush Goyal, recently highlighted the inconsistency of Western sanctions, noting that Germany had received a waiver for its Rosneft-owned refineries. Goyal asked why India should be treated differently, exposing the duplicity and hypocrisy of the West’s approach.

The sanctions are creating an artificial price segmentation in the global market, where Western-compliant buyers pay a premium for non-Russian oil, while non-compliant buyers can purchase Russian oil at a discount. This means that Russia may lose some revenue, but the buyers of its oil will capture the margin, effectively receiving an energy subsidy. In the long run, this strategy may erode the relative position of the sanctioning coalition, as it reshapes trade networks and creates new opportunities for Russia and other sanctioned countries.

The implications of these sanctions are far-reaching, with potential consequences for the global economy and energy market. As the situation unfolds, it remains to be seen how India and other countries will respond to the US pressure, and whether the sanctions will achieve their intended goal of isolating Russia.