Why it matters: New U.S. sanctions are forcing India and China, Russia's biggest oil customers, to choose between cheap crude and the entire U.S. dollar-based financial system.
💥 Driving the news: The Trump administration sharply escalated economic measures against Moscow on Wednesday, sanctioning Russian oil giants Rosneft and Lukoil.
The goal is to cripple Vladimir Putin's war machine and drive him to the negotiating table with Ukraine.
Oil prices immediately jumped more than 5% as the measures reverberated through global energy markets.
The big picture: Since the 2022 invasion of Ukraine, India and China have become the primary buyers of Russian seaborne crude, snapping up about 80% of its total exports.
This trade, often at a discount, has funded about a quarter of Moscow's federal budget.
India's Reliance Industries alone has earned a windfall of about $6 billion over three years from the cheap oil.
🛑 State of play: The world's largest refiners are already hitting pause.
India's Reliance Industries, owner of the world's largest refinery, said it would "recalibrate" imports and is considered unlikely to "take a chance" on U.S. punishment.
The Indian government has also privately asked refiners to start cutting down on Russian imports.
China's state-backed operators have also paused most purchases, though smaller independent refiners may continue and some traders believe the pause may be temporary.
🏦 How it works: The U.S. is threatening "secondary sanctions" on any "participating foreign financial institutions" that deal with Rosneft and Lukoil.
For global companies like Reliance, this means risking losing access to U.S. capital markets and dollar-based financing—a risk many see as too great.
"This is an attempt to put pressure on Russia. No self-respecting country ever does anything under pressure."
Nov. 21: The deadline given by the U.S. Treasury for companies to wind down their dealings with the sanctioned firms.
🔮 What's next: Analysts expect a sharp drop in Russian oil purchases starting next month.
While China will likely continue some pipeline imports, it's not expected to absorb the massive volume India is set to drop.