Trump’s tightrope between oil sanctions and dollar status

THE now departed Biden administration threw one last furious punch at Russia on Jan 10 with tough new sanctions aimed at crippling Moscow’s energy industry. Previous levies in 2022 were limited to reducing oil revenues that fund Russia’s war in Ukraine while avoiding a supply shortfall that could have sent global oil and gas prices soaring. As always, the oil traders worked around the rules, using non-Western tanker fleets and insurance firms – and kept Russia’s Ural crude flowing, mostly to refineries in India and China.

This time the sanctions are designed, inter alia, to force buyers not to take supply from any of the 183 Russian-controlled tankers. After Mar 12, anyone who continues to do business with the marked energy sellers will face US sanctions. Even Chinese companies involved in Russia’s Arctic LNG 2 project and its new Vostok oil project, both of which are in the Arctic; coal companies; and other metals firms; have become targets.

Clearly, the timing of the new sanctions regime shows the depth of rage at the way the Ukraine war has gone so far. This time, Biden’s team showed they couldn’t care less about the chances of US retail petrol prices rising. If oil prices surge, that would be a problem for President Donald Trump and for Beijing and Delhi to sort out. There has also been an attempt to handcuff the new White House team in the way these orders were imposed, using presidential executive powers. One order, embedded within the ambit of an existing law, requires legislative consultation to lift or modify. Trump would have to confront Congress, and the ensuing certainty of cantankerous debate, if he wants any change.