President of the United States Donald Trump’s the proposed new sanctions or lowering the price of oil will not persuade Russia to make concessions regarding the war in Ukraine.
This is the opinion of the experts interviewed by from the Foreign Policy Institute and the Bank of Finland.
Yesterday, Thursday, at the Davos Economic Forum, Trump proposed that Russia should be pressured into peace negotiations by lowering the price of oil.
According to Trump, Russia is able to finance its war because the price of oil is so high. Trump has pranked the Russian president to Vladimir Putin about the weak state of the Russian economy and threatened Russia with new “sanctions, taxes and duties”.
On Friday, however, Trump also criticized Ukraine. Trump said Fox News in the interview that no Volodymyr Zelenskyi be “no angel”. According to Trump, Ukraine should not have fought against Russia, but the countries “should have made a deal” before the start of the war.
So Trump is putting pressure on both sides of the war – even if it is only a war of aggression against Russia.
If negotiations begin, it will be because of Trump, not his threats
Senior researcher at the Foreign Policy Institute Jussi Lassila says Trump may have a chance to get peace talks underway. This is not only due to threats of sanctions.
– The reason is that Putin senses in Trump an opportunity to achieve his most important goals in terms of war, says Lassila.
According to Lassila, Russia currently has no reason to bend to Ukraine’s demands in the peace negotiations. According to Lassila, Putin sees the Russian economy as sustainable and the situation at the front favors it.
If Trump really wants to scare Russia, instead of sanctions, he should talk about a significant increase in military support, says Lassila.
The Bank of Finland’s next senior advisor for Russia Laura Solanko says that no single economic sanctions will change the Russian leadership’s commitment to the war in Ukraine.
Even a significant drop in the price of oil would hardly be reflected in Russia’s belligerence.
– Of course, it would have a significant impact if the price of a Russian barrel of oil were even halved, Solanko says.
However, according to Solango, the war in Ukraine is also the most important priority of Russia’s economic policy, and they are ready to direct more money to it – by any means.
Why would an oil trader cut prices?
It is also completely open whether Trump’s oil plan would even be feasible. Trump said in his Davos speech that he intends to ask Saudi Arabia and other OPEC oil producing countries to lower oil prices.
First of all, according to Solango, lowering the price of oil would also affect US oil producers, whose production costs are much higher than in Saudi Arabia. The consequences would be felt even worse in the Middle East.
– For Saudi Arabia, the export of oil is still much more essential than for Russia. If the price of a barrel of oil fell to, say, $40, it would be a disaster for the Saudis, says Solanko.
In order for the Saudis to be willing to lower prices, according to Solango, the United States would have to offer something really significant in return. Without this, Saudi Arabia wants to keep the price of oil stable at the current price of around $75 a barrel.
After the start of the war in Ukraine, Western countries could have hit Russia’s oil production with harsh sanctions and crippled the country’s oil trade. However, this was not done, because manipulating energy prices easily leads to internal political consequences. Western countries were content to reduce their oil purchases from Russia.
– We haven’t had any actions aimed at reducing Russia’s oil exports. It is desired that the same amount of oil enters the world market as before the war, says Solanko.
Politicians have not dared to touch oil
Statistical data on the sale of Russian oil and natural gas show that the income it received has remained high throughout the war. In particular, China and India have increased their oil purchases from Russia after Western countries reduced them, it appears From the Russia Fossil Tracker website.
Russian fossil energy has continued to enter the EU, for example Hungary, Slovakia and France. Ukraine also allowed Russian natural gas deliveries through its territory until the end of last year.
If Russia’s oil trade had been restricted, the world market price of oil would have risen and made everyday life more expensive in Western countries as well. This would have been a really big challenge for power-hungry politicians, especially since persistent inflation was already plaguing a large part of Western countries.
Instead, the Western allies decided to force Russia to sell oil at a discount, i.e. they set a price ceiling for Russian oil. To counter this, Russia established a so-called “shadow fleet”, which sells Russian oil through middlemen past the price ceiling.
The Western Allies imposed sanctions on the shadow fleet, but in early January they were significantly expanded.
The new sanctions will not come into effect until mid-February, but you can already see their effect, says Solanko of the Bank of Finland.
– The shipping traffic of Laukaansuu, the most important port in the Russian Baltic Sea, has decreased significantly since the sanctions were announced, Solanko says.
According to Solango, many Indian ports announced after the sanctions notification that they would no longer do business with shadow fleet tankers. Solanko estimates that the sanctions will make Russian oil exports significantly more difficult in the coming months.
However, Solanko repeats that he does not believe that the Kremlin cares enough about economic problems for the difficulties to be immediately visible on the battlefields of Ukraine.