U.S. President Donald Trump hit Russia’s two biggest oil companies with sanctions in a sharp policy shift on Moscow’s war in Ukraine, prompting global oil prices to rise by 5% on Thursday and India to consider cutting Russian imports.
The sanctions target oil giants Rosneft and Lukoil, which between them account for more than 5% of global oil output, and mark a dramatic U-turn by Trump, who said only last week that he and Russian President Vladimir Putin would soon hold a summit in Budapest to try to end the war in Ukraine.
While the extent of the financial hit on Russia may be limited in the short term, the move is a powerful signal of Trump’s intent to squeeze Russia’s finances and try to force the Kremlin towards a peace deal.
Putin derided the sanctions as an unfriendly act, saying they would not significantly affect the Russian economy and talked up his country’s importance to the global market. He warned a sharp supply drop would push up prices and be uncomfortable for countries like the United States.
“This is, of course, an attempt to put pressure on Russia,” Putin said. “But no self-respecting country and no self-respecting people ever decides anything under pressure.”
With Ukraine asking U.S. and European allies for long-range missiles to help turn the tide in the war, Putin also warned that Moscow’s response to strikes deep into Russia would be “very serious, if not overwhelming”.
STRAIN ON OIL REVENUES
The U.S. sanctions move has already prompted Chinese state oil majors to suspend Russian oil purchases in the short term, trade sources told Reuters. Refiners in India, the largest buyer of seaborne Russian oil, are set to sharply cut their crude imports.
A drop in demand from Russia’s two largest customers will put a strain on Moscow’s oil revenues and force the world’s top importers to seek alternative supplies.
Trump, in his latest about-face on the conflict, said on Wednesday that the planned Putin summit was off because it would not achieve the outcome he wanted and complained that his many “good conversations” with Putin did not “go anywhere”.
“We cancelled the meeting with President Putin — it just didn’t feel right to me,” Trump told reporters at the White House. “It didn’t feel like we were going to get to the place we have to get. So I cancelled it, but we’ll do it in the future.”
Putin said Trump most likely meant the summit had been postponed.
Russia has signalled that its conditions for ending the war in Ukraine – terms which Kyiv and many European countries regard as tantamount to surrender – remain unchanged.
The conflict raged on as European Union leaders and Ukrainian President Volodymyr Zelenskiy met in Brussels on Thursday to discuss funding for Ukraine, with momentum building to use frozen Russian assets to provide a 140 billion euro ($163 billion) loan to Kyiv.
Moscow said it would deliver a “painful response” if the assets were seized.
