Donald Trump has scrapped a meeting with Vladimir Putin, reportedly to have taken place in Budapest next month, stating that ‘it just didn’t feel right’ and with that that in mind, announced heavy sanctions on the Russian oil industry, in a major, aggressive shift of his Ukraine policy.
‘The time has come’, he said at the White House, following the announcement by Treasury Secretary Scott Bessent regarding new penalties on the two largest Russian oil companies.
"Every time I speak with Vladimir, we have good discussions, but then they don't go anywhere," Trump emphasised to reporters during his meeting with the NATO Secretary General.
He expressed the hope that the sanctions won’t have to remain for long and as such, contribute to ending the war in Ukraine.
The measures taken against Rosneft and Lukoil, the country's oil giants, mark the first time the US has sanctioned Russia since Trump’s return to office in January.
Bessent, justified the sanctions as necessary because of “Putin’s refusal to end this senseless war” and that the companies targeted were responsible for funding the Kremlin’s “war machine”.
The US was prepared to take further action.
Trump has called the sanctions “tremendous”, but according to a Guardian report, experts remain split on how effective they will be in slowing Russia’s war and bringing Vladimir Putin to the negotiating table – with many saying it will come down to how aggressively the US enforces them.
What has been announced
The sanctions announced by the Treasury will see all assets belonging to Rosneft and Lukoil in the US frozen, while at the same time US companies and individuals will be barred from doing business with them. The measures also include sanctions against dozens of subsidiaries of the companies.
The US is also threatening secondary sanctions on foreign financial institutions that do business with Rosneft and Lukoil – which could include banks that facilitate sales of Russian oil in China, India and Turkey.
Rosneft and Lukoil account for nearly half of Russia’s crude oil exports, according to Bloomberg. Both companies were sanctioned by the UK last week, and on Thursday the EU will also announce a raft of new measures against Russia, in the 19th package since the war begun.
Why now?
On the campaign trail in 2024, Trump claimed he would end the Ukraine war “in 24 hours” if elected. But since returning to the White House, he has found the task more difficult than he envisioned.
According to Guardian experts, his commitment to the war has flip flopped – from stating last month that Ukraine could regain all the land lost since the 2022 invasion, to this week suggesting that the country's Donbas region could be carved in a way that would leave most of it under Russian control.
This week, Trump abruptly pulled out of a planned second summit with Putin, amid reports his administration was frustrated by preconditions set for the meeting by the Russian side.
Trump has been resisting pressure from allies in Congress to impose further sanctions, but Russia’s unwillingness to shifts its position – along with sustained lobbying from Europe, appear to have changed his calculations.
Taxes from the energy industry account for around a quarter of Russia’s budget and additional sanctions will help to further constrict Rosneft and Lukoils ability to do business, placing further pressure on Putin. Or at least that's the plan.
Marshall Billingslea, a treasury official during Trump’s first term, told the Guardian that the threat to target banks that do business with both companies was among the most critical measures announced, as it would make it more difficult for companies importing Russian crude oil.
“Even if the Indian, Chinese, Turkish refiners want to keep buying, their bank(s) may say ‘no’.”
Thomas Graham, a fellow at the Council on Foreign Relations, was more circumspect, telling Bloomberg “if the White House thinks this is going to lead to radical change in the Kremlin’s conduct or Putin’s policy, they’re deluding themselves.”
“Sanctions work slowly and the Kremlin has been very good at circumventing these kinds of sanctions.”
Ultimately, the impact of the new measure will come down to how active the US is in enforcing their threats against financial institutions who do business with Rosneft and Lukoil. The Biden administration chose not to impose sanctions on both companies over concerns that such a move could drive up energy costs at a time when rising inflation was finally being tamed.
Experts say that Trump’s campaign promise to keep petrol prices low and manage the cost of living crisis could dilute the impact of the new sanctions, if they start to dramatically affect the oil price.
What's next?
Allies of Ukraine continue to push Trump towards other avenues of support – among them a plan to use Russian assets frozen at the start of the war to fund Ukraine’s defence. This week EU leaders are expected to agree on a 140 billion euro interest-free loan for Ukraine backed by Russian assets frozen in Europe. Reports suggest the US has backed away from supporting such a plan itself.
Volodymyr Zelenskyy is also continuing to lobby the US for long-range weapons that could strike far inside Russia. Efforts to secure Tomahwaks at a White House meeting last week were dashed after Trump held a phone call with Putin.
On Wednesday, the Wall Street Journal reported that the Trump administration would let Ukraine use long-range missiles supplied by allies for attacks deep inside Russia, such as the British-supplied Storm Shadow cruise missiles used for a recent strike on a chemical plant in Bryansk, despite concerns from Washington about a potential escalation of tensions with the Kremlin.
But Trump denied on social media that he had lifted any restrictions, saying “The US has nothing to do with those missiles, wherever they may come from, or what Ukraine does with them.”
He further explained that one of the reasons that he has yet to approve sending Tomahawks to Ukraine is their complex use.
'We know how to use them but we're not teaching others', the US President said.,