UK and U.S. Impose Major New Sanctions on Russian Oil Sector

On October 15, 2025, the United Kingdom imposed major new sanctions targeting Russia’s oil industry, including asset freezes on Rosneft and Lukoil, the country’s two largest oil companies. A week later, on October 22 and despite an ongoing government shutdown, the United States followed suit by issuing parallel sanctions on both entities. The sanctions represent a renewed attempt to deprive Russia of vital oil revenues and constrain its ability to finance the war in Ukraine. Companies with any direct or indirect connections to the Russian oil sector should urgently review their exposure to these new restrictions and wind down transactions with sanctioned entities in accordance with applicable general licenses.

The United Kingdom’s package comprises around 90 new designations, including asset freezes on a number of oil refineries in India and China that help facilitate the flow of Russian oil to global markets. These measures heighten the pressure on other countries that continue to support Russia’s energy exports.

The sanctions prohibit transactions with designated entities and certain of their subsidiaries, regardless of whether those subsidiary entities have been individually designated. In the UK, the threshold for ownership for sanctions to extend to a subsidiary is “more than 50%,” and sanctions also apply to entities controlled by the designated entity.¹ In the United States, meanwhile, a subsidiary is sanctioned by operation of law if it is owned 50% or more, directly or indirectly and in the aggregate, by one or more sanctioned parties. U.S. law does not have a separate control test. Additionally, the sanctions require U.S. and UK persons, including U.S. and UK financial institutions, to block (i.e., freeze) any property or interests in property belonging to the sanctioned parties or their majority-owned subsidiaries.

Both the Office of Financial Sanctions Implementation and the Office of Foreign Assets Control (OFAC) have issued general licenses authorizing a winding-down period for existing transactions with certain Rosneft and Lukoil subsidiaries into November to allow an orderly cessation of business activities with these entities. Any transactions with these parties outside the timeframe or conditions specified by the general licenses must be authorized through a specific license.

The United States has also left open the possibility of imposing secondary sanctions on foreign financial institutions and others that conduct significant business with Rosneft and Lukoil. This could potentially include banks and others in countries such as China, India, and Turkey that facilitate Russian oil sales, who are exposed to the risk of being cut off from the U.S. financial system.

Moreover, the recent U.S. designations expand export controls on Rosneft and Lukoil. Rosneft and Lukoil were added to the U.S. Department of Commerce, Bureau of Industry and Security’s (BIS) Entity List in 2014 after Russia invaded and annexed Crimea. Rosneft’s and Lukoil’s Entity List entries only imposed export license requirements on items used in oil and gas exploration and production. However, Section 744.8 of the Export Administration Regulations (EAR) imposes full export controls on entities designated by OFAC for reasons related to Russia’s invasion of Ukraine. As a result, a license is now required to export, reexport, or transfer (in-country) to the two entities any item subject to the EAR. And, because of the recently enacted BIS “Affiliates Rule,” Rosneft’s and Lukoil’s majority-owned foreign affiliates are subject to the same broad restrictions.

The European Union (EU) announced a complementary sanctions package on October 23, 2025, including a full transaction ban on Rosneft and Gazprom Neft (another key player in Russia’s energy sector and a strategic partner with Lukoil), and a ban on imports of Russian liquefied natural gas beginning in January 2027. The EU’s latest sanctions package strengthens and expands previous measures by imposing a full transaction ban to close loopholes and reinforce the EU’s broader strategy to limit Russia’s economic resilience.

Context and Significance

Despite Russia’s heavy reliance on energy revenues to fund its war in Ukraine, Western governments have so far been cautious about directly sanctioning Russian oil majors due to concerns about the potential impact on global energy prices and inflation. Instead, they have relied on alternative measures, such as the G7 oil price cap, which prohibits the provision of maritime transport, insurance, and related services to Russian oil sold above a set price threshold. The cap aims to suppress Russian revenues by setting conditions that incentivize buyers to purchase at or below the capped price.

The latest designations represent a significant increase in pressure on Moscow following the lack of progress in U.S.-led peace talks. The U.S. sanctions are particularly notable as they are the first new Russia measures introduced under the second Trump administration, following earlier concerns that under President Trump the United States might take a more lenient approach and potentially diverge from its allies by easing Russian sanctions.

In particular, President Trump has publicly criticized President Putin for refusing to compromise in peace negotiations, including rejecting a proposed ceasefire along current frontlines. While President Trump has expressed hope that the sanctions will be short-lived, the future of the sanctions will depend on Russia’s willingness to engage in genuine peace talks.

Next Steps for Companies

The new measures demonstrate a renewed commitment among Western allies to tighten sanctions on Russia. Further escalation is likely absent a shift in Moscow’s approach, complicating the risk landscape for companies with continued links to Russia or its energy sector.

To mitigate potential compliance risks, companies should:

• Review their exposure to the Russian energy market and the newly sanctioned entities.
• Assess whether any ongoing transactions are managed appropriately through issued general licenses, or whether further protective measures are necessary.
• Prepare for complete cessation of business with the sanctioned entities, if required, before the expiry of the applicable general licenses on November 21, 2025.
• Ensure that their sanctions compliance programs are designed to thoroughly investigate the ownership and control of higher-risk entities, instead of simply relying on screening the names of counterparties.
• Review their customers and suppliers to ensure no items subject to the U.S. EAR are exported, reexported, or transferred (in-country) to Rosneft or Lukoil or a foreign affiliate of Rosneft or Lukoil captured by the Affiliates Rule.

Joy Wee contributed to this Advisory. Ms. Wee is employed as an associate at Arnold & Porter's London office.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.