One of the glaring omissions to many dedicated energy market observers in the past few years has been the U.S.’s avoidance of meaningfully punishing countries who support rogue states. This can be either through offering logistical support that enables such a state to continue to export whatever it wants or by buying these exports, which effectively bankrolls these states to pursue their illegal activities. A full arsenal of primary or secondary sanctions have been available to Washington to do so, but they have never been used in full force and in a fully coordinated way with its allies. One of the most notable examples of this in recent years was the failure to seriously sanction Iraq, which acted as the facilitator for Iran to keep exporting huge quantities of oil – and whatever else it wanted to export – around the world, as analysed in full in my latest book on the new global oil market order. Another was the unwillingness to do the same to China, which continued to buy much of this oil (and other major export products) from Iran during this period. This cosy U.S. inaction for these countries appears now to have ended, although whether this new active policy will succeed depends on how rigorously it is implemented.
The latest iteration of this idea is clear enough, based on comments from U.S. President Donald Trump last week. These were that Washington would impose 100% secondary sanctions on any country that buys Russian exports if Moscow does not reach a peace agreement with Ukraine in the 50 days following the announcement – so, 2 September. According to industry data, India has imported an average of 1.69 million barrels per day (bpd) of Russian crude and condensates this year, China an average of 1.09 million bpd, and Turkey 377,000 bpd. Together these comprise 53% of Russia’s total seaborne exports of these commodities. It is apposite to note that the last time Trump gave a deadline to a country – 60 days for Iran to agree to full dismantlement of their nuclear programme and zero enrichment of any uranium – the day after it expired saw massive attacks on it by the U.S.’s main ally in the Middle East and then by the U.S. itself. Trump added: “If we don’t have a deal in 50 days, we’ll have tariffs and 100% secondary tariffs.” At the same time as this threat hangs in the balance, the ‘Sanctioning Russia Act of 2025’ is making its way through the U.S. legislative process. This would significantly up the ante for Russia, as it is centred on the imposition of 500% duty on all goods or services imported into the U.S. from any country that — according to the text of the bill — “knowingly sells, supplies, transfers, or purchases oil, uranium, petroleum products, or petrochemical products that originated in the Russian Federation”. The bill currently has 84 listed co-sponsors in the U.S. Senate alone, according to the U.S. Congress website. The Speaker of the House has also indicated his chamber’s support to pass the bill.
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It is also apposite to note that on the same day as Trump stated the deadline for Russia in Ukraine, NATO General Secretary Mark Rutte announced a deal with the U.S. for it to sell weapons to NATO countries which they could then send to Ukraine. Trump added that the arms deliveries would be wide-ranging and would include the Patriot missile batteries that Ukraine has repeatedly requested for air defence against increasing Russian missile and drone attacks Trump also said that the initial missile deliveries would come “within days” from European stocks, and they would then be replenished by U.S. supplies. Running in parallel with the ramping up of military pressure and tariffs pressure from the U.S., Europe has finalised its 18th sanctions package against Russia. This saw a reduction in the previous US$60 per barrel (pb) price cap on Russian oil to $47.60 pb – much close to the previously longstanding price of production before the Russia-Ukraine War began of around US$40 pb. Europe also announced a ban on refined products made from Russian crude in third countries, adding that this was aimed at preventing Russian crude oil from reaching the European Union (E.U.) market via through the back door. Just as with the planned U.S. tariffs, these are particularly focused on exports from India, China and Turkey. Building on previous European and U.S. sanctions, the E.U. further widened the scope of actions against Russia’s ‘shadow fleet’ that seeks to move its oil covertly around the world. Another 105 vessels were added to the E.U.’s blacklist, taking its total to 444. For the first time under European sanctions, the captain of a shadow tanker was specifically targeted, as well as an international flag registry. Additionally, a further 22 Russian banks, foreign financial institutions, and crypto service providers believed to be aiding the Kremlin were placed on the blacklist. This close practical co-ordination between the U.S. and its allies in Europe and elsewhere reflects their twin overall aims now, according to a senior security source in the E.U. and parallel sources in Washington: “First, it is to end the war in Ukraine once and for all, and second to erase any idea in Putin’s head that he can win any further conflict in Europe”.
Prior to the second presidency of Donald Trump, the reluctance to go ahead with bold moves of this nature reflected a trust in the effectiveness of traditional diplomatic routes. It was thought by the administrations of Barack Obama and Joe Biden, for example, that gentle pressure only should be applied to India, by dint of the fact that it was designated to play a key role in U.S. attempts to position it as an economic, political and military rival to China, as also detailed in full in my latest book. On the other hand, Washington back then did not want to disturb China too much, as it was seen as a useful occasional ally for the U.S. in dealings with Russia and several countries in the Middle East, among others. The view in Trump’s Washington appears to be that these diplomatic methods have failed and that decisive action – ony then followed by a more diplomatic tack – will work. Decisive action on Iran, coupled with Trump’s unpredictability, certainly appears to have prompted a sharp reversal in the previous drift towards China and Russia by many Middle Eastern countries, most notably Saudi Arabia, the U.A.E, and Syria. And huge tariffs imposed on China’s exports to the U.S. also appeared to have changed the fundamental narrative regarding the long-running trade deficit between the two countries. For Russia in Ukraine, it remains to be seen what happens when the clock ticks down past the 50-day deadline mark.
By Simon Watkins for Oilprice.com
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