To stop Putin’s war, refineries processing Russian oil must be punished

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The writer is CEO of Hermitage Capital

For more than three and a half years, Vladimir Putin has staked his political and personal survival on the continuation of Russia’s war on Ukraine. As long as the conflict is extremely important to Putin’s grip on power, he will continue to fight, ignoring the human and material losses. Current Western sanctions, despite their impact, have not been surgical enough. Russia’s war effort remains financially resilient, not because sanctions have completely failed, but because they have left Russia’s most important source of revenue largely intact: oil and gas exports.

Financing Oil and Gas Sales Approx. A a fourth Kremlin war; In 2024 from oil revenues alone It rose by more than 25 percent To more than $108 billion despite the sanctions. Since 2023, China, India and Turkey have become the backbone of Russian oil exports, buying almost en masse $380bn The value of Russian crude. This gives Putin a lifeline to finance the war at a cost of approx 1 billion dollars daily.

The G7 crude oil price cap, implemented at $60 per barrel in late 2022, was intended to limit Moscow’s profits while keeping global supplies stable. But the system has eroded under the weight of non-compliance and weak implementation. in spite of The recent reduction in the maximum price By the European Union and the United Kingdom to $47.60, Russia used a “shadow fleet” of legacy tankers, opaque insurance companies and shell companies to hide ownership, circumvent sanctions, and sell most of its crude above the cap. Estimates indicate that As much as 75 Percent of Russian crude oil now moves outside the scope of the G7 insurance and traceability systems.

Europe’s continued reliance on Russian liquefied natural gas has become another lifeline for Putin. Since February 2022, The European Union imported more than $122 billion of Russian liquefied natural gasMaking it one of Russia’s largest fossil fuel customers. This continued reliance on Russian energy highlights the urgent need for a more comprehensive and coordinated approach to sanctions.

How can the West cut off this lifeline more effectively? The answer lies in the threat to refineries that process the lion’s share of Russian crude, which are largely concentrated in just eight facilities across China, India and Turkey. Refineries such as Jamnagar and Vadinar In India and Turkey Asters and tuprasand Major Chinese refineries Majority management Redirection of Russian flows. Some operations, such as Reliance Industries’ Jamnagar complex Hundreds of thousands barrels per day. Others, such as Nayara Energy’s Vadinar facility, partly owned by Russia’s Rosneft, are now almost complete. It depends entirely on Russian crude.

The West should set a clear ultimatum: which refinery will process Russian oil – whether for export or domestic sale – which it should choose. They could either cut energy ties with Russia, or if they continued to buy Russian crude, they would face a comprehensive embargo on Western shipping, finance and insurance. This is not a call to punish India or Türkiye, but rather a call to make clear that legitimate participation in global trade cannot coexist with the laundering of Russian war revenues.

The United States, despite its direct sanctions restricting Iranian oil income, has not stopped its exports to China, which now buys Iranian oil. More than 1.4 million barrels per day of Iranian crude, most of it via opaque brokers at deep discounts. This highlights a key lesson: sanctions should not only target producers, but also key consumers and the networks that enable them. The United States and the European Union should expand secondary sanctions to include financial institutions and shipping companies that allow illicit Russian energy trade, mirroring the secondary approach used against Iran.

European Union 2025 sanctions It has the effect of banning imports from refineries using Russian feedstocks, regardless of where the products are blended or reclassified. For example, Indian company Nayara Energy has been isolated from major suppliers in the Gulf and is now so Increased reliance on discounted Russian barrelsa sign of the initial success of the sanctions.

But it is precisely this outcome – a narrowing of the range of legitimate buyers and shrinking profit margins for the Kremlin – that should be accelerated. With these measures, Russian oil will be more forced to buyers on the black market at painful discounts: $20 to $30 per barrel instead of more than $60. This would cut Russia’s oil revenues by three-quarters, providing strategic leverage powerful enough to force Putin to the negotiating table.

The costs of post-war reconstruction in Ukraine are expected More than half a trillion dollars. Funding these efforts requires ensuring that not a single dollar, rupee, or yuan continues to fuel the Kremlin’s war machine. Western leaders must muster the courage to implement this strategy. Crude oil, refined products, and liquefied natural gas remain the arteries of Putin’s regime. Cutting it off is not only the clearest way to end Russia’s war; He may be the only one.