Donald Trump hit Russia with a new raft of sanctions targeting major oil companies on Wednesday in an apparent effort to strong-arm the Kremlin into sitting down for peace talks over Ukraine.
The new sanctions were unveiled one day after plans for a summit between Trump and Vladimir Putin fell apart, with the US leader expressing doubt in Russia’s commitment to ending the war.
The U.S. Treasury Department said Russia’s two largest oil companies, Rosneft and Lukoil, were targeted in a bid to damage Moscow’s ability to fund its war machine.
The move was a sharp turnaround for Trump, who in recent days had been insisting upon Putin’s willingness to come to the negotiating table – while conceding that he might have been “played”.
With the announcement of sanctions, U.S. Treasury Secretary Scott Bessent said that it was time “to stop the killing and for an immediate ceasefire”, as oil prices rose by more than $2 a barrel.
Trump has resisted pressure from US lawmakers to extend sanctions, but acknowledged that he felt it was time, with little tangible progress made towards ending the war since he took office.
The sanctions blacklist Russia’s two largest oil producers, Rosneft and Lukoil, which between them export around 3.1 million barrels of oil every day.
This amounts to almost half of Russia’s total crude-oil exports, according to Bloomberg. Taxes from the oil and gas industries prop up about a quarter of Russia’s federal budget.
The Russian economy relies on exports of fossil fuels to foreign buyers. China and India are among the biggest customer of Russian oil and gas.
China, which promptly denounced Trump’s decision, imported some 100 million tonnes of Russian crude oil last year, accounting for around 20 per cent of its total energy imports.
The risk for Russia’s customers is the threat of secondary penalties for dealing with sanctioned entities. Even though China and India, for example, are not explicitly targeted by the sanctions, they could find themselves shut out from Western banking systems, insurance or access to dollars for engaging with the companies.
Increased energy prices will affect businesses, which will affect consumer prices.
The American sanctions align with the decision by EU countries to approve a 19th package of sanctions including a ban on Russian liquefied natural gas imports, announced Wednesday. The UK also hit Rosneft and Lukoil with sanctions last week.
US lawmakers have been arguing for months that tough energy sanctions are needed to bend Russia’s arm and bring it to the negotiating table.
