Russian President Vladimir Putin struck a defiant tone on Thursday after the U.S. imposed new sanctions on Russia’s two largest oil companies. The move by President Donald Trump aims to pressure the Kremlin to end the war in Ukraine and caused an immediate 5% spike in global oil prices. Trump just last week arranged a summit with Putin, so this move is a major reversal and ushers in a new era of economic conflict.
What Do the New U.S. Sanctions Target?
Russian oil giants Rosneft and Lukoil, which together produce more than 5% of the world’s oil, are specifically targeted by the sanctions. Energy markets experienced a 5% price increase as a direct result of the financial impact. The move also prompted key Russian customers to pull back. Chinese state oil majors have suspended Russian oil purchases in the short term, according to trade sources. Meanwhile, refiners in India, the largest buyer of seaborne Russian crude, are set to sharply cut their imports.
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How Did Putin and Trump Respond?
Putin derided the sanctions as an “unfriendly act” and claimed they would not significantly affect the Russian economy. He warned that a sharp drop in supply would push up global prices, hurting countries like the United States. “This is, of course, an attempt to put pressure on Russia,” Putin stated. “But no self-respecting country and no self-respecting people ever decides anything under pressure.” When asked about Putin’s dismissal of the sanctions’ impact, Trump told reporters, “I’m glad he feels that way. That’s good. I’ll let you know about it in six months from now.”
Why Was the Planned Trump-Putin Summit Cancelled?
This sanctions announcement followed a major diplomatic about-face. Trump called off a planned summit with Putin in Budapest, stating, “It just didn’t feel right to me.” He explained that he did not believe the meeting would achieve the desired outcome, a shift from his position just days prior. Putin, however, suggested the summit was merely postponed. This cancellation highlights how recent diplomatic efforts, including a meeting in Alaska in August, have failed to bring the situation to a close.
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What is the Broader International Context?
The U.S. sanctions are part of a wider effort to isolate Russia financially. On the same day, the European Union adopted its 19th package of sanctions, banning Russian liquefied natural gas (LNG) imports. Russian oil and gas revenue accounts for about one-quarter of its budget, making it the most important source of cash for the war. However, Moscow’s main revenue comes from taxing output, not exports, which may soften the immediate financial blow. Meanwhile, Ukraine’s President Volodymyr Zelenskiy hailed the U.S. sanctions as “very important” but urged more pressure to force a ceasefire.
