What Russian oil sanctions means for Europe and the rest of the world?

On August 15th 2025, the US President Donald Trump and Russian President Vladimir Putin held a summit meeting at Anchorage, Alaska.

The headlines focused on the geopolitical and diplomatic aspects of the Russian invasion of Ukraine. Despite emerging from their summit without a breakthrough, the future of global trade will be determined by what Trump and Putin will do next. From Europe’s LNG imports to China’s oil pipelines, sanctions, previous US tariffs, and shifting alliances are altering the trade routes of energy and commodities in ways that could define the next decade of global markets.

Europe’s energy dependence

Before the Ukraine war in 2021, Russia supplied more than 40% of the European Union’s gas imports. Determined to end its dependence on Russian gas, the EU has reduced that share to just 11% by 2024.

As of Q2 2025, Norway (33%), the United States (24%), and Algeria (21%) became the EU’s primary gas providers, surpassing Russia (14%).

Even with the success, the EU is still buying Russian energy – just in different ways. In the first half of 2025, Russian imports of liquified natural gas (LNG) hit €4.48 billion which is nearly a 30% increase than a year prior – despite the European Commission planned to prohibit the import of Russian gas by the end of 2027.

This discrepancy reflects the uneven reliance across member states: For instance, Hungary and Slovakia receives the majority of their gas from Russia due to old pipeline networks remaining active. On the other hand, countries like Poland and Lithuania have already cut Russian gas imports completely.

Brussels faces a dilemma on how to wean itself from Russian energy – balancing a united regarding sanctions and energy policy with political and economic realities.

Russia’s eastward shift…

As Europe looks elsewhere, Moscow has been reinforcing ties to its allies towards the East. Since 2021, it has been rerouting vast volumes of oil elsewhere, with China emerging as the critical buyer.

The G7’s oil price cap has made it especially attractive. Imposed in late 2022, it pushed Russian crude well below global benchmarks. That discount made its barrels especially attractive to buyers in China and India, both of which have increased imports despite Western pressures.

Despite this, Gazprom – an energy corporation that is majority owned by the Russian state, will soon will soon expand flows through the existing Power of Siberia pipeline from 38 to 44 billion cubic metres (bcm) annually, while the planned Power of Siberia 2 via Mongolia could potentially add another 50bcm/year. Combined, the pipelines allow Russia to send over 100bcm/year to China, replacing the demand it once delivered to the EU.

This energy partnership is being reinforced on the diplomatic stage. Following the 2025 Shanghai Corporation Summit in Tianjin, Putin joined Chinese President, Xi Jinping, at a Vicory Day military parade in Beijing to signal a show of unity – a symbolic reminder that energy deals are only part of a much broader geopolitical strategy.

How supply chains are reshaping…

We also ought to know how effective the sanctions placed by Western nations are in the long term.

They have pushed Russian trade toward Asia and the Global South, a trend that has compounded by previous US tariffs on steel, aluminium, and other commodities implemented by Trump that have already strained supply chains globally. By July 2025, China made up of 42% of Russia’s fossil-fuel export earnings, while India adds another 38%. This is compared to the EU with only 9%.

Sanctions have also created parallel markets as an unintended consequence: shell companies and obscure middlemen now transport Russian oil in the international market, often at steep discounts below market average. This system not only circumvents the restrictions placed, but creates an environment for less regulated markets to operate in a legal grey area.

Implications…

Sanctions don’t just affect Russia – it affects the entire global economy.

One that is most significant is currency. As more Russian oil and gas are sold in Chinese Yuan and Indian Rupees instead of Euros or Dollars, the yuan gains weight in global trade at the expense of the dollar’s dominance in the commodities market. This could influence how central banks across the world manage their reserves.

On top of that, there are also inflationary pressures. Discounted Russian oil helps countries like China and India curb import costs, boosting their international competitiveness, while the EU faces higher costs for LNG from the US and other alternatives – costs that results in passing down into households and businesses.

Conclusion…

The Trump–Putin summit may not have changed the political headlines, but it underlined a deeper reality that sanctions does not fully stop the Russian economy, they only adapt to different markets, new partners, and opportunities to keep energy and money flowing.

For Europe, the challenge is how to keep the lights on while staying united. For Russia, the pivot to Asia brings in revenue but increases its dependence on Beijing. And for China, cheap energy strengthens both its economy and its influence on the world stage.