Russia tried to sell a huge lump of oil. Nobody wanted it.

Russia has failed to sell a large quantity of oil, a sign that soon-to-be-imposed sanctions on its state-owned oil giant are ravaging the energy industry that supports its struggling economy.

Moscow maintained a high pace of energy exports in the two months following the invasion, bringing in revenues that Kyiv says are funding the Kremlin’s war machine. Many US allies left oil and gas supplies out of their toughest sanctions against Russia. At a time of skyrocketing energy prices, importers in India and elsewhere rushed to buy cheap Russian kegs.

But exports have taken a hit in recent days as Rosneft ROSN 2.86%

Oil Co. has had trouble finding buyers for enough oil to fill a fleet of tankers, traders familiar with the sale said. The producer, in which the government has a large minority stake, called on companies to bid for the oil last week, according to traders and a document shown to the Wall Street Journal.

A Rosneft spokesman had no immediate comment.

The problems with the sale provide an early indication that European sanctions against Rosneft, due to take effect on May 15, are beginning to disrupt Russia’s ability to ship crude oil from oil fields to foreign buyers.

The sanctions are less severe than a total ban on Russian imports. Many expect that Europe will eventually adopt a phased outright ban on Russian oil imports – an embargo called for by newly-elected French President Emmanuel Macron but opposed by Germany and Hungary, among others.

But existing sanctions, imposed by the EU in mid-March and replicated by Switzerland, will ban companies from reselling Rosneft oil outside of Europe. That includes sales in the large Asian market, particularly India, which has sucked up some of Russia’s oil demand since Moscow invaded Ukraine.

Traders can continue to import Rosneft crude and refined products into the EU and Switzerland, which were exempted to avoid exacerbating diesel and other fuel shortages. But many companies in Europe are quick to find non-Russian oil wells. The sanctions are also aimed at Transneft,

the extensive government pipeline system that transports oil to ports, creating an additional hurdle in dealing with Russian fuel.

If Rosneft continues to struggle to sell, it would provide another shock to an economy already locked out of much of Western finance and trade. The company says it is Russia’s largest taxpayer, contributing a fifth of budget revenues. Overall, Russia’s oil and gas sales accounted for 45% of the federal budget in 2021, according to the International Energy Agency.

“If they can’t sell, they have to close,” said Adi Imsirovic, a senior research fellow at the Oxford Institute for Energy Studies and a former head of oil trading at a subsidiary of Gazprom PJSC.

Russia’s top diplomat said risk of nuclear world war should not be underestimated after US offered more military support to Ukraine; Defense officials from more than 40 countries gathered in Germany as shelling continued in Kharkiv. Photo: Felipe Dana/Associated Press

Rosneft, which is run by longtime Putin ally Igor Sechin, last week submitted bids for about 5.1 million tons of the Urals — or about 38 million barrels, enough to fill 19 large tankers — according to the traders and the document . It demanded payment in rubles, an unusual twist, and said the oil would be loaded onto tankers at ports in the Baltic and Black Seas in May and June. Smaller quantities of other crudes – including Siberian Light, Espo and Sokol – were also offered.

Reuters previously reported Rosneft’s inability to sell the oil.

Rosneft focuses on drilling for oil and gas and refining crude oil into usable fuels. It has long outsourced most of the actual selling of the stuff to a handful of dealers, including Trafigura Group Pte. Ltd., Vitol and Glencore PLC,

which in turn shipped the oil to buyers around the world.

However, traders are withdrawing from the Russian market before EU sanctions come into effect. Vitol, the world’s largest independent oil trader, which has had a presence in Moscow for three decades, expects to stop trading Russian oil by the end of the year, people familiar with the decision said.

Rosneft’s tender was an attempt to export crude oil that trading companies were no longer willing to handle, people familiar with the sale said.

Unlike the US, Russia doesn’t have much space to store oil, so dwindling demand is quickly returning through the supply chain, prompting producers to scale back production. Once wells are shut down, bringing them back to their previous capacity can be difficult.

Production has already declined since the Feb. 24 invasion, although the extent of the losses is difficult to gauge as Moscow limits the release of data for a number of sectors. Rosneft and smaller private manufacturers will face longer-term problems stemming from sanctions for selling Western parts and technology to Russia, analysts say.

In a sign that refiners outside Russia are looking for alternative suppliers, the country’s flagship Ural crude is trading at about $35 a barrel below international benchmark Brent, said Tamas Varga, an analyst at brokerage firm PVM Oil Associates. Before the war, the two types of crude oil traded within a few dollars of each other.

Write to Joe Wallace at and Anna Hirtenstein at

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