As President Joe Biden nears the end of his time in office, his administration is taking a stronger stance against Russia, pushing forward with new sanctions that some critics believe should have been introduced long ago.
These measures are specifically aimed at limiting Russia’s oil sales on the global market—a move that Biden had previously hesitated to make for fear of pushing up oil prices and increasing costs for American consumers.
However, with just days remaining in office, the Biden administration is escalating its efforts. The new sanctions focus on Russia’s so-called “shadow fleet” of oil tankers.
These are vessels that covertly operate to evade existing sanctions. In addition, the sanctions will target Russian oil producers, shipping companies, oilfield service providers, and traders involved in brokering Russian oil deals.
“This is the most significant sanction yet against the Russian energy sector,” a senior administration official stated during a briefing on January 9. “The logic behind these sanctions is clear—they target every stage of the oil production and distribution chain.”
These measures are just the latest in a series of sanctions imposed by the United States and its Western allies since Russia’s invasion of Ukraine in February 2022. While these sanctions have damaged Russia’s economy, they have not significantly impacted its ability to fund the ongoing war. The key source of funding for Russia’s military efforts is oil sales, which remain essential to the Russian economy.
Trump’s Bold Claims and the Role of Sanctions
As the 2024 presidential race heats up, former President Donald Trump has been outspoken about his plans to end the Russia-Ukraine war quickly, claiming he could reach a peace agreement with Putin within 24 hours of taking office.
However, he has since walked back this bold claim, acknowledging that peace talks could take months. Trump has also indicated that he plans to meet with Russian President Vladimir Putin if he returns to the White House.
Should Trump win and keep the sanctions in place, the measures introduced by the Biden administration could give him significant leverage in negotiations with Putin. However, reaching a peace deal may not be as simple as Trump suggests.
Putin has shown no interest in ending the war anytime soon, especially as his troops continue to make gradual advances in Ukraine. Some analysts believe that Putin might hold out for better terms from a potential Trump administration, seeing it as a way to solidify territorial gains, including eastern Ukraine.
The Impact of Sanctions on Russia’s Oil Revenue
One of the most important effects of these new sanctions is their potential to reduce Russia’s oil revenue. Russia already sells oil at a discount of about $15 below global prices due to a Western price cap of $60 per barrel, along with other punitive measures.
Even with these lower prices, Russia has been able to generate enough income to keep its economy running and sustain its military operations. However, if the price of oil dropped further, it could have a devastating effect on Russia’s economy.
Chris Weafer, CEO of Eurasian consulting firm Macro-Advisory, recently highlighted the severity of the situation. “If something happened tomorrow and the price of oil went down to $50, never mind $40, the Russian economy would immediately be destroyed,” he said in a podcast. “That’s 100% critical for Russia.”
The pressure on Russia’s oil revenue is real, but there’s a potential catch. Tougher sanctions on Russian oil could actually lead to a rise in global oil prices. By reducing the supply of oil available on the global market, it could push prices up rather than down.
In fact, the announcement of the new sanctions caused a sharp increase in the price of Brent crude, pushing it up by about 5% to $80 per barrel. If Russia can continue selling its oil at higher prices, even with the discount, the sanctions could end up benefiting Russia by bringing in more revenue rather than less.
The Global Ripple Effect of Sanctions
The challenge for Ukraine and its Western allies is clear. While the sanctions are meant to harm Russia’s economy, they could unintentionally drive up global oil prices, which would have a ripple effect on countries worldwide. As the world faces rising energy costs, the impact of the sanctions could become more complicated.
The fact that Russia is still able to sell oil at a discount—while continuing to make significant profits—shows just how resilient the Russian economy has been in the face of Western sanctions. Even with the increasing pressure, Putin’s government remains determined to press on with its military objectives, using its oil revenue as a key tool to fund the war.
Conclusion
As the Biden administration makes its final push to tighten sanctions on Russia, the question remains: will these measures have the desired effect? The impact on Russia’s oil revenue could be significant, but the broader global economic consequences make it a tricky situation. While sanctions may continue to weaken Russia’s ability to finance the war, it’s unclear if they will force Putin to back down anytime soon.
As Trump looks ahead to the possibility of a meeting with Putin, the stakes have never been higher. The new sanctions could give him leverage, but with Russia’s military progress and Putin’s ongoing defiance, a quick resolution may remain elusive.
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