The war economy that has financed Russia’s full-scale invasion of Ukraine for 45 months has relied heavily on revenues from oil and gas exports — as well as what critics call Western complacency — and on China and India’s reluctance to fully cut off Russian energy imports.

Now, however, the United States — together with the European Union and the United Kingdom — is targeting Russia’s largest oil and gas companies and their vast web of subsidiaries and affiliates.

On October 22, the US Treasury announced sanctions on state-owned Rosneft and privately held Lukoil, Russia’s two biggest oil producers, whose exports have been a key source of funding for the Kremlin.

A day later, the EU imposed its own sanctions on Rosneft and Gazprom Neft, a major oil arm of gas giant Gazprom.

President Donald Trump said from the White House on October 22 that the sanctions were “very significant — they target their two main companies,” calling them “massive.”

Will these sanctions work?

The short answer: not immediately.

Alexandra Prokopenko, a former adviser at the Russian central bank and a fellow at the Carnegie Russia Eurasia Center in Berlin, said, “I think the short-term impact of these sanctions will be limited. Both companies were likely preparing for this in advance. A large share of their oil exports is already priced in yuan and rubles, so I don’t expect a dramatic effect on the budget.”

Maria Shagina of the International Institute for Strategic Studies in Berlin called the measures the first truly consequential steps taken by the Trump administration, reflecting frustration with what she described as Russia’s “foot-dragging” on efforts to scale back or end the war in Ukraine.

But she added: “It remains to be seen how serious the Trump administration is about enforcing them.”

The US announcement delayed implementation for one month — until November 21. “More importantly,” Shagina noted, “it’s unclear whether the Treasury will take an extraterritorial approach and target Chinese and Indian entities, including banks, through secondary sanctions.”

Jennifer Kavanagh, a senior fellow at the Defense Priorities think tank in Washington, expressed doubt that the measures would significantly affect the war: “For Putin, this war is existential. He’s already shown he’s willing to pay an enormous price — in both Russian lives and economic costs. This latest round of sanctions won’t change his calculus.”

The China (and India) factor

Since the February 2022 invasion, the West has tried to strangle Moscow with sweeping sanctions, making Russia the most heavily sanctioned nation on Earth.

Yet its economy has defied Western predictions of collapse — avoiding a total fiscal breakdown, ruble crash, or runaway inflation.

While growth has slowed, this is largely due to domestic policy decisions such as interest-rate hikes by the central bank to contain inflation. The Kremlin has also raised taxes to preserve revenue streams.

At the same time, Moscow has shown no sign of scaling back its wartime spending despite massive human losses.

Western sanctions have proven more porous and less effective than anticipated, allowing Russia to continue selling oil and gas to eager buyers in China, India, Turkey, and elsewhere.

According to the International Energy Agency, Russia earned $13.35 billion from crude and fuel exports in September — down sharply from July — mainly due to Ukrainian drone attacks on refineries and pipelines that cut refining capacity by as much as 30%.

European loopholes and enforcement limits

Europe remains a weak link in the sanctions regime: some countries, like Slovakia and Hungary, continue buying Russian oil, while others — such as the Netherlands, France, and Belgium — still import Russian liquefied natural gas (LNG). EU members also purchase substantial volumes of Russian gas via the TurkStream pipeline.

Trump sharply criticized Europe in a recent UN speech, saying, “They are funding the war against themselves. Who has ever heard of such a thing? They must stop all energy purchases from Russia immediately, or we’re wasting our time.”

Most EU countries halted crude imports in 2022, followed by refined fuels in 2023. The bloc says it aims to end Russian LNG imports entirely by 2027 and has sanctioned more than 20 foreign firms — mostly Chinese — tied to Russian oil trade.

Russia’s workarounds

Rosneft and Lukoil have built alternative systems and supply chains to cushion the blow.

Energy analyst Leslie Palti-Guzman, founder of Energy Vista, said, “The effectiveness of sanctions depends on how strictly they’re enforced and on the strength of US-led alliances. Russian firms have mastered evasion tactics — but Western technologies are tracking ship-to-ship transfers, masking operations, and potential buyers more closely.”

Rachel Ziemba of the Center for a New American Security added: “The new sanctions will be partially offset by the safety nets Rosneft, Lukoil, and their buyers have already put in place. They’ll have an effect, yes — but not a decisive one unless the US shows real willingness to apply secondary sanctions to foreign banks and ports, not just threaten them.”

China and India’s stance

How Beijing and New Delhi — Russia’s biggest oil customers — respond remains uncertain.

China is one of Moscow’s closest commercial and political partners, increasingly reliant on Siberian pipeline gas.

India, meanwhile, has so far resisted US pressure to reduce its Russian oil purchases, prompting Trump to impose punitive tariffs in August, citing New Delhi’s continued energy imports from Moscow.

But signs of a shift are emerging. Reports indicate that Reliance Industries — India’s largest buyer of Russian oil, which holds a supply contract with Rosneft for about 500,000 barrels per day — has suspended imports following Washington’s sanctions announcement.

“New Delhi is more sensitive to US threats and is expected to scale back gradually,” said Shagina. “But scaring off China’s small ‘teapot’ refineries, which are less integrated into global energy markets, will be much harder.”

Palti-Guzman concluded: “Aside from China, who’s still willing to take the risk of buying Rosneft oil?”

US stock indexes rose at the start of trading on Friday after the release of US inflation data strengthened expectations of a Federal Reserve interest rate cut.

Government data released earlier showed that the annual consumer price index (CPI) rose 3% in September, below forecasts of 3.1%.

Following the report, the CME FedWatch tool showed that the probability of a December rate cut jumped to 98.5%, compared with 91% before the data release, while the odds of a cut at next week’s meeting remained between 98% and 99%.

The rally came as the US government shutdown entered its 24th day, with investors also monitoring corporate earnings reports.

As of 15:34 GMT, the Dow Jones Industrial Average rose 0.7% (338 points) to 47,071, the broader S&P 500 gained 0.7% (50 points) to 6,790, and the Nasdaq Composite climbed 1.1% (251 points) to 23,195.

Palladium prices fell on Friday despite a weaker US dollar against most major currencies and renewed optimism over easing trade tensions between the United States and China — factors that would typically support demand.

According to Capital.com, palladium has risen about 26% since the start of October to around $1,500 per ounce. This surge has coincided with gains in the platinum market and a general loosening of global financial conditions.

Expectations of US interest rate cuts and a softer dollar have also contributed to the metal’s rally, part of what analysts call the “Gold + Liquidity Wave” that has lifted precious metals broadly.

Palladium is used almost exclusively in catalytic converters for gasoline engines, meaning US car and electronics manufacturers could face sharp cost fluctuations.

Technical analysis from Monex indicates resistance between $1,500 and $1,520 per ounce, with forecasts suggesting that while the overall trend remains upward, trading is likely to stay volatile in the near term.

Analysts at CPM Group noted that palladium’s strength is “closely linked to platinum’s performance,” while cautioning that continued inflation and weakness in the US labor market could restrain demand growth.

Meanwhile, the US Dollar Index edged down less than 0.1% to 98.8 by 13:59 GMT, after touching a high of 99.1 and a low of 98.7.

At the same time, palladium futures for December delivery dropped 2.1% to $1,457.5 per ounce at 14:00 GMT.

Bitcoin climbed above $111,000 on Friday, heading for weekly gains after the White House confirmed that US President Donald Trump will meet Chinese President Xi Jinping next week — a move that eased fears of a prolonged trade war between the world’s two largest economies. Investors also awaited key US inflation data due later in the day.

The world’s largest cryptocurrency rose nearly 2% to $111,410 by 02:58 a.m. Eastern Time (06:58 GMT) and was set for a weekly gain of around 3% after two consecutive weeks of sharp losses.

Rally driven by Trump–Xi meeting confirmation

Bitcoin rebounded from early-week declines as traders welcomed signs of a potential thaw in US–China relations.

The White House confirmed Thursday that Trump and Xi will meet on the sidelines of the APEC summit in South Korea next week. The announcement followed weeks of escalating tariff threats and harsh rhetoric that had unsettled financial markets.

It also coincided with ongoing trade talks in Malaysia, where US Treasury Secretary Scott Bessent and Trade Representative Jamison Greer met Chinese Vice Premier He Lifeng in an effort to calm tensions before the leaders’ summit.

The negotiations aim to prevent a new round of tariffs — including Washington’s proposal for a 100% levy on Chinese imports — and address Beijing’s recent restrictions on rare-earth metal exports.

The easing of trade tensions boosted risk appetite across markets, lifting equities and cryptocurrencies, which have increasingly moved in tandem with shifts in investor sentiment.

Investors await US inflation data

Markets are now focused on the US Consumer Price Index (CPI) for September, due later Friday after a delay caused by the government shutdown. The report is expected to shed light on whether price pressures have eased enough to justify a Federal Reserve rate cut at next week’s policy meeting.

Trump pardons Binance founder

President Donald Trump granted a full pardon to Changpeng Zhao (CZ), the founder of cryptocurrency exchange Binance, who had been convicted of violating anti–money laundering laws.

White House spokesperson Karoline Leavitt confirmed the decision Thursday.

Zhao, a billionaire known by his initials “CZ,” pleaded guilty in late 2023 to one count related to his company’s failure to implement an effective anti–money laundering program. He served four months in prison as part of a settlement that required Binance to pay a $4.3 billion fine.

In a post on X (formerly Twitter), Zhao expressed “deep gratitude” for the presidential pardon, pledging to help “make America the crypto capital of the world.”

Other cryptocurrencies rise

Most altcoins also advanced on Friday, though they remained range-bound amid cautious sentiment.

Ethereum, the world’s second-largest cryptocurrency, rose 2.4% to $3,978.55; XRP gained 1.1% to $2.44; Solana climbed 3.2%; and Cardano added 1.6%.