Trump has given Russia 50 days to agree to a ceasefire in Ukraine or else he will go ahead with severe sanctions to make sure Russia can not profit from sale of their oil. To do so, he must sanction countries that are buying Russian oil. Russia profits from selling fossil fuels, namely oil, natural gas, coal, LNG (liquified natural gas), and petroleum products. In total, the sale of these fuels result in sales of 687 million dollars per day, according to the CREA. On their website, sales are reported in Euros, and I have converted them to dollars.
The specific large buyers of oil and gas are China, India and Turkiye. So, why not just tell these countries to stop buying fossil fuels from Russia until Putin stops the war?
I’ll start with China, which many economists already knew that tariffs would likely hurt the US economy more than China’s. President Xi Jingping did not open up discussions with the US immediately as Trump threatened China. Instead, he flew to Vietnam and other trading partners in a move to show Trump, Chinese products don’t have to be sold in the US. See link below:
Trump losing leverage as China trade war fires duds
Next up is India which is close to a trade deal. Not something Trump will want to upset. India greatly increased its imports of oil from Russia after 2022, because it could buy the oil at discounted prices. India recognized Ukraine in 1991, yet does not support international sanctions against Russia.
Finally Turkiye (note the correct spelling) which is part of NATO, and has provided military equipment to Ukraine. US needs. But, they will continue to buy Russian oil. There has been many issues in the past including Turkiye’s purchase of military defense weapons, similar to Patriot missiles, from Russia. I think Trump will see Turkiye as an ally in the Ukraine war, and will not dare sanction them for their purchase of Russian oil.
It’s interesting, because Trump has given Russia 50 days to find peace in Ukraine, or else he will sanction the buyers of fossil fuels. China and India are the largest buyers with each country importing about 4.1 billion dollars of oil per month. These are secondary sanctions to be added to the tariffs.
So, who else is sanctionable? Hungary and Slovenia import Russian oil, each around 200 million per month. Relative to China, India and Turkiye, these are not sizeable purchases. If Trump goes beyond oil, there are other fossil fuels, like LNG, and petroleum products. Japan, Taiwan, South Korea, the EU and Brazil could join the list of sanctionable countries.
Sanctioning Brazil will not happen. Remember Trump has already threatened Brazil with a 50% tariff on all goods, because they are putting ex-president Jair Bolsonaro on trial. President Lula has responded, stating that Brazil would retaliate with 50% tariffs. So, if tariffs go to 150% because of their purchase of petroleum products, Brazil would retaliate with 150% tariffs. And both countries would be losers, but the US would be the bigger loser, because we have a trade surplus with Brazil.
Using sanctions, tariffs or embargos as a means of forcing countries to change policy can hurt the US more than the targeted country.
At the very end of the CREA analysis, they note three ways to Ukrainian allies can “tighten the screws” on Russia’s oil exports. I think it is a very thoughtful analysis, as none of these measures have any means of immediate retaliation, and they would be directed at Russia rather than China, India and Turkiye.
- Lower the Price Cap established by the EU sanctions to $30/bbl.
- Restrict the growth of ‘shadow’ tankers & plug the refining loophole. This one gets complicated so it’s best to defer to the CREA analysis.
- Stronger enforcement and monitoring
The tanker shipments of crude can be monitored. Trump likes actions he can take unilaterally, but they generally are not successful. Biden thought he could cripple Putin with severe sanctions, at the onset of the war in Feb 2022. It didn’t work.
Stay tuned,
Dave
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