TOPSHOT – US President Donald Trump leaves after a Hispanic Heritage Month event in the East Room of the White House October 6, 2017 in Washington, DC. President Trump invited over 200 Hispanic business, community, and faith leaders, and guests from across the country to join in the celebration of Hispanic Heritage Month. (Photo by Brendan Smialowski / AFP) (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images)
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One of U.S. President Donald Trump’s foremost campaign promises was to end the war between Russia and Ukraine. It’s now August, the eighth month of the administration, and the war rages on. It appears that the administration has chosen the field on which it wishes to fight this battle, it’s in China and India. Early in the conflict, the Biden Administration placed sanctions on Russia’s oil. According to the Center for Research on Energy and Clean Air, these sanctions were largely ineffective, as the oil was simply redirected to China, India, and Turkey. If that wasn’t bad enough, Turkey’s Ceyhan port then took those Russian oil products and sent them to the EU.
At the end of 2022, the G7 chose to impose a $60 price cap on Russian oil. According to the U.S. Treasury, the purpose of the price cap was to restrict the price Russians could fetch for their oil without removing those barrels from the market. This would reduce Russia’s profits while still maintaining oil flows and preventing a price shock. The response from China and India to the oil price cap was to purchase even more discounted oil from Russia. In May 2023, the Institute for Energy Research reported record purchases of oil by the two nations, a total of 110 million barrels for the month, which was up 10% from the prior month. China and India, being heavily dependent on oil imports and ranking first and third respectively, will seize any opportunity to purchase cheap oil in the market.
Prior to Trump entering the White House, the Biden administration did make some efforts to discourage these countries from the continued purchases of the discounted oil. There was a renewed threat of sanctions coupled with offers to assist India in finding alternative sources, but these attempts never panned out. The sanctions on Russian oil, combined with the price caps, were not a failure, they just did not bring about an end to the conflict. Although sanctions on Russian oil did not end the war in Ukraine, the impact was felt throughout the country as oil revenues declined by 50% year over year, according to Bruegel, a think tank specializing in economic policy research. This significant revenue decline brought about cuts to social services like healthcare and education, in addition, public pensions were frozen, and inflation rose to 12%. This strain on social services has caused protests to break out around the country, most notably in 2024.
How President Donald Trump Is Changing Oil Markets
Donald Trump took office in January 2025, and by his third day in office, he was asking the Organization of the Petroleum Exporting Countries to increase oil production. Most of the overt reasoning around this was about lowering gas prices and decreasing U.S. inflation. The secondary result was placing even more pressure on Russia. Trump threatened 100% tariffs on China on August 1 if the Chinese did not stop purchasing Russian oil. Then the U.S. president threatened India, via a Truth Social post, with more tariffs if India didn’t follow suit as well. This is all possible because OPEC has just announced another production increase of 574,000 barrels of oil a day, which brings the total OPEC increase to 2.2 million barrels a day from the start. There is a myriad of ways all of this can play out, and none of them are good for most American consumers.
We have now entered a phase of this negotiation where Trump’s efforts to strong-arm Chinese and Indian leaders into redirecting their oil import flows could significantly impact the U.S. economy and U.S. consumers. Economists may debate the actual impact of these tariffs on the consumer, but there is no doubt it will be felt, it is only the degree and severity of it still in question. Much like in the Middle East in previous decades, oil markets now play a pivotal role in global military conflicts and their prospective resolution.
