Western sanctions are tightening, shipping routes are more heavily policed and flagship companies are under pressure to exit long-held foreign assets. Yet long-term contracts and refinery constraints mean Russian hydrocarbons are still moving to key markets, though on increasingly restrictive and costly terms.
Germany’s Yamal LNG dilemma
Germany’s position illustrates the tension between political goals and contractual reality. SEFE, the former Gazprom subsidiary now under German state control, remains tied into a long-term liquefied natural gas contract with the Yamal LNG project in the Russian Arctic. The deal provides for around 2.9 million tonnes of LNG a year and runs into the 2040s; analysts estimate that termination without recognised force-majeure grounds could trigger claims in the order of €10 billion.
Yamal LNG itself is a consortium rather than a state-owned Russian exporter. It is led by Novatek, with France’s TotalEnergies and Chinese investors CNPC and the Silk Road Fund as shareholders. Under Russia’s favourable tax regime for this Arctic project, the joint venture benefits from extensive exemptions on mineral extraction tax and export duties, while selling cargoes into European LNG terminals in Belgium, the Netherlands and France. Gas delivered there can then enter the EU grid and ultimately reach Germany, even as Berlin declares that it has ended direct imports of “Russian gas”.
The EU’s 19th sanctions package, adopted in October, introduces a phased ban on Russian LNG imports, giving Berlin a stronger legal basis to push SEFE out of the Yamal contract. Until that framework is fully in place, however, the risk of large compensation claims limits how quickly Germany can disconnect from these flows.
India: refinery switches but continued dependence
India, which became one of Russia’s main oil customers after 2022, shows a similar gap between headline announcements and refinery practice. Reliance Industries, the country’s largest private refiner and formerly the single biggest buyer of Russian crude, has confirmed that it stopped importing Russian oil into its export-oriented Special Economic Zone refinery at Jamnagar with effect from 20 November. From 1 December, all exports from that unit are to be produced from non-Russian crude, in order to comply with tighter US and EU sanctions on Russian energy.
However, this does not amount to a complete Indian exit from Russian oil. Reliance and other refiners have sought similar grades – such as Iraqi Basra – but many of those volumes are tied up in long-term contracts, limiting the scope for rapid substitution. Some Russian crude is still being processed in Reliance’s domestic refinery, and other Indian buyers remain active, although recent data show a sharp fall in Russia’s overall shipments to India as sanctions risk has increased.
Falling revenues and contested data
Whatever the precise volumes, Russia’s oil revenues are clearly under pressure. Bloomberg’s tanker-tracking data show that income from seaborne crude exports has fallen to its lowest level since early 2023, with weekly receipts dropping to about $1.2 billion as export volumes ease back and prices for Urals-grade crude decline. Fuel exports have also fallen to their weakest level since the start of the full-scale invasion, reflecting refinery disruptions from Ukrainian drone strikes as well as sanctions on products.
Sanctions, however, are only one part of the picture. Global factors also weigh on flows, including weak demand, lower benchmark prices and the use of tankers as floating storage while traders wait for more favourable market conditions. Rerouting around Africa to avoid insecurity in the Red Sea further lengthens voyages and increases the volume of oil recorded as “at sea”. Taken together with inconsistencies between commercial shipping datasets, these elements make it difficult to attribute the fall in revenues solely to Western measures.
Shadow fleet and Venezuela
Sanctions enforcement is becoming more visible at sea. In mid-November, a US Navy destroyer repeatedly crossed the path of the sanctioned tanker Seahorse as it attempted to deliver fuel from Russia to Venezuela. The vessel made several U-turns and eventually loitered in the Caribbean rather than approaching Venezuelan ports. The incident, documented through AIS tracking and reported by maritime outlets, indicates that Washington is prepared to use naval assets to disrupt Russia’s so-called shadow fleet where shipments underpin the Maduro government.
Serbia and the loss of Balkan assets
Pressure is also building on Russian downstream positions in south-east Europe. In Serbia, Russian stakeholders in the oil company NIS – primarily Gazprom Neft with an additional Gazprom stake – have agreed in principle to sell their controlling share after US sanctions threatened to cut off financing and crude supplies to the country’s only refinery.
Belgrade is now examining options for European buyers, including Hungary’s MOL, to take over part or all of the Russian holding. A successful transaction would reduce Serbia’s dependence on Russian oil while keeping NIS integrated into European logistics. For Gazprom Neft, it would mark another enforced retreat from assets acquired during the period when Russian firms were expanding across the Balkans’ energy sector.
Lukoil’s overseas portfolio at risk
Lukoil, Russia’s largest privately owned oil company, faces similar constraints on a wider scale. After new US sanctions were announced in October, the US Treasury granted a time-limited waiver until 13 December to allow negotiations over the sale of Lukoil’s international assets. The company has signalled a preference to sell its overseas operations as a single package, but potential buyers – including Western majors and Gulf firms – are mainly assessing specific projects rather than the whole portfolio.
Even if deals can be agreed, sanctions rules mean that much of the proceeds may be held in escrow until restrictions are lifted, limiting the immediate benefit for the Russian parent. Host governments, meanwhile, are preparing contingency plans ranging from temporary external administration to eventual nationalisation to ensure continued operation of refineries and fuel networks if ownership remains unresolved.
A constrained energy power
The picture that emerges from these developments is of an energy power that still moves large volumes of oil and gas but with diminishing room for manoeuvre. Long-term contracts in Europe and Asia slow the pace of disengagement from Russian supplies, yet sanctions enforcement, shipping risks and the forced sale or loss of overseas assets are steadily reducing both the revenue and the strategic leverage that Moscow once derived from its hydrocarbons.
Risk in European Waters: The Shadow Fleet, Sanctions Evasion and Safety Gaps
