Oil prices rose sharply on Thursday after the United States announced the first sanctions of Donald Trump's second term, targeting Russian energy giants Rosneft and Lukoil. The moves mark a major policy shift from the White House's previous stance on the war in Ukraine.
The US has sanctioned Russian oil companies financing the war in Ukraine PHOTO: Shutterstock
Oil prices continued to rise on Thursday, more than $1 a barrel above the previous day's levels, after Washington imposed sanctions on Russian oil companies Rosneft and Lukoil. The measure comes in response to Moscow's refusal to accept a truce in the war in Ukraine, Reuters reports.
Brent crude futures rose $1.76 to $64.35 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.68 to $60.18 a barrel.
Washington is threatening new measures
“Given the President Putin's refusal to end this war nonsense, Treasury sanctions Russia's two biggest oil companies funding Kremlin's war machineTreasury Secretary Scott Bessent said in a statement.We encourage our allies to join us and adhere to these sanctions.”he added.
The United States has announced that it is prepared to take further measures if Moscow does not accept a truce. Last week, Britain in turn sanctioned Rosneft and Lukoil, and the European Union approved a 19th package of sanctions, which includes a ban on Russian liquefied natural gas (LNG) imports.
Market reactions and immediate effects
Immediately after the announcement, Brent and WTI contracts rose by more than $2 a barrel, also supported by higher energy demand in the US. However, analysts point out that the short-term effect remains limited.
“Although news of the sanctions boosted crude oil prices, the gains so far have been relatively modest because past threats of sanctions or tariffs have been watered down or delayed and also due to difficulties in enforcing sanctions”, explained Tony Sycamore, market analyst at IG.
Last week, Washington asked Japan, one of the main buyers of Russian LNG, to stop importing energy from Russia ahead of Donald Trump's visit to Asia.
Change of strategy in Trump's policy towards Russia
These are the first direct sanctions imposed by Trump on Russia for the war in Ukraine. In his first term, the American leader avoided such measures, preferring trade pressure.
The Treasury Department has announced that it is prepared to continue the series of sanctions if Russia does not stop its offensive in Ukraine, which began in February 2022.
In parallel, Trump imposed additional tariffs of 25 percent on imports from India, accusing New Delhi of profiting from Russian oil sold at a discount. China, another big buyer of Russian crude oil, was not targeted by these tariffs.
After the imposition of the $60 per barrel ceiling by Western states, Russia has redirected its oil exports to Asian markets.
Trump: “I don't think it's the right time”
The US president said on Wednesday that he had canceled the planned summit in Hungary with Vladimir Putin. “I don't think it's the right time”Trump said.
He added that he hopes the new sanctions “not be needed for a long period of time”. In the past, the White House leader has warned that prolonged restrictions could hurt the dollar's role as the dominant currency in the global oil trade, noting that Russia has often demanded payments in other currencies.
“It cannot be a one-size-fits-all measure”
Analysts believe that the Trump administration's decision is an important step, but one that must be followed by consistent actions.
“It can't just be one time” said Edward Fishman, a former US official and researcher at Columbia University. “The question is whether the US will now threaten anyone who does business with Rosneft and Lukoil with sanctions”.
For his part, Jeremy Paner, a former Treasury Department investigator, warned that the absence of banks and buyers from India or China on the sanctions list “will not attract Putin's attention“.
A Ukrainian official welcomed Washington's decision, calling it “excellent news”. Kiev had previously proposed including Rosneft and Lukoil among the targets of US sanctions.
The Russian embassy in Washington and Russia's permanent mission to the United Nations had no immediate comment on the new sanctions, according to Reuters.
