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Mint
8 minutes ago
- Mint
How much damage can Trump's campaign against Russian oil inflict on Moscow?
Three years ago, the Biden administration came up with what it considered a clever policy to curb Russia's ability to finance the war on Ukraine. Instead of trying to remove Russian oil from the global market, something that would have shaken economies worldwide, Washington quietly urged countries such as India to keep buying it—as long as Moscow was forced to sell at a steep discount. Its strategy of capping the price below market rate, developed when a barrel of crude neared $120, proved a boon for buyers. Top among them were India and China. But it failed to derail the Russian economy or dent President Vladimir Putin's ambitions to conquer Ukraine. Now, with oil prices at $67 per barrel of Brent, President Trump has sensed an opportunity to turn up the pressure on Moscow to end the war. He announced Wednesday an additional tariff of 25% on India for buying Russian oil. He said he was considering similar punishments on other buyers, including the biggest, China, as he plans for a possible summit with the Russian leader. The moves have caused the biggest rift between Washington and New Delhi in decades. The fundamental question now is whether these secondary sanctions, combined with other steps such as increasing arms deliveries for Ukraine, would convince the Kremlin to accept a cease-fire in the foreseeable future. Oil and oil-product exports, worth more than $500 million a day, constitute the lifeblood of the Russian economy, allowing the Kremlin to keep recruiting troops with high bonuses and to fund the country's vast military industries that have expanded despite Western sanctions. 'Political unrest in Russia follows the oil prices and the oil revenues," said Tymofiy Mylovanov, president of the Kyiv School of Economics and a former economy minister of Ukraine. 'If the sanctions on Russian oil are really going to be enforced, and it's a big if, and if they last for at least a few months, then people around Putin will start getting seriously nervous that that cash may run out." Not everyone is as optimistic. Even if all Russian oil is removed from the global market—something that is unlikely to happen because of Chinese purchases—the Kremlin would likely persist in its war aims, said Sergey Vakulenko, who served until 2022 as head of strategy and innovation at Gazprom Neft, one of Russia's main state oil companies. Halving Russian oil and oil-product exports could cause global crude prices to jump well above $100 a barrel, he predicted. 'The world will suffer a lot of pain if Russian oil is cut off, and the Kremlin knows that. Putin's calculus is that his pain endurance is much higher than the West's, and so he's ready to wait for some time in complete certainty that the West will blink first," said Vakulenko, who is now a scholar at the Carnegie Russia Eurasia Center in Berlin. Trump's moves would overlap with other measures meant to increase the economic pressure on Russia. The European Union's latest round of sanctions, passed last month, introduced a rolling cap for permitted Russian oil sales that is meant to stay consistently 15% below the market rate. The EU also expanded sanctions on Russia's shadow fleet of tankers. Elina Ribakova, a senior fellow at the Peterson Institute for International Economics, said secondary sanctions could create a problem for Moscow and Beijing alike. 'It would meaningfully slow down Russia-China trade until they figure out how to circumvent it," she said. Since the European Union—historically the biggest buyer of Russian energy—cut its purchases in 2022, India has accounted for 38% of Russian crude exports, re-exporting much of it to Europe after refining, and China 47%. Inside the EU, Slovakia and Hungary continue to buy Russian oil through a special exemption. Turkey is the largest global buyer of Russian oil products. Phil Gordon, who served as Vice President Kamala Harris's national security adviser, said the Biden administration weighed several factors as it encouraged India to continue buying Russian oil. 'The logic was that we obviously wanted to punish Russia and make it pay a price for the outrageous invasion of Ukraine. But we needed to balance that against concerns that driving Russian export volumes down too much could significantly increase the price of oil," he said. 'If you drive up global energy prices and force the U.S. or the world into a recession, we would then end up paying the price and be less in a position to help Ukraine." The U.S. efforts, while reducing Russian oil income, 'didn't have as much of an effect on the Russian economy as we hoped," Gordon said. Still, the cumulative effect of sanctions and the economic demands of pursuing the war are starting to cause cracks in the Russian economy. Russia's National Wealth Fund, which receives tax revenue from oil sales, has lost some 80% of its liquid assets as Moscow draws on its reserves to boost its defense industry and provide cash payouts to Russian men signing up to fight in Ukraine. Moscow is also seeing a growing budget deficit, said Iikka Korhonen, the director of the Bank of Finland's Institute for Emerging Economies, as it looks elsewhere to pay for the war. Ultimately, though, Korhonen said a lack of funds would likely only cause Putin to cut social spending to keep up the effort. 'I don't see any indication that Putin will cut down on defense spending," he said. Gordon said that with softer global oil prices, it makes sense for the Trump administration to try curbing Russian exports. 'There is a much looser oil market now, and we could be more comfortable taking Russian barrels off without worrying about a price spike," Gordon said. Success, he said, would require not only tariffs on buyers of Russian oil but also sanctioning Russian and Chinese banks, joining G-7 partners in lowering the price cap and going aggressively against the shadow fleet of Russian tankers shipping its oil to customers—measures that the Trump administration hasn't pursued so far. In India, Prime Minister Narendra Modi's government seemed to be initially willing to quietly reduce its purchases of Russian oil. Its relationship with the U.S. was more important. But Trump's public outbursts on the matter have turned it into an emotionally charged issue, making it harder for Modi to compromise. 'Do you think it is domestically sustainable even for someone as strongly positioned as Narendra Modi to go and cave in to the Americans?" said Evan Feigenbaum, vice president for studies at the Carnegie Endowment for International Peace and a former deputy assistant secretary of state for South Asia. 'No way." India has complained of double standards in Washington, which continues to buy Russian uranium hexafluoride, and in the EU, which remains a key buyer of Russian liquefied natural gas. 'India thought it had covered its base, and now it is in the crossfire between Russia and the U.S.," said Indian strategist Raja Mohan. 'These guys changed their lines, and India finds itself with a political challenge." China's incentives to comply with U.S. pressure are even lower. Beijing sees Moscow as a critical partner in its strategic confrontation with Washington, one of the reasons China is providing Russia with access to funding and technologies even as it stopped short of supplying lethal weapons. Meanwhile, Ukraine has been trying to dent Russia's revenue from selling oil products by attacking refineries, with significant hits in recent weeks. It has also been targeting Russian fuel-storage facilities with a slew of drone strikes. If Russia is forced to significantly cut the volume of oil exports, it will simply run out of storage for oil and will have to cut production and even close down some wells, potentially causing severe damage to its economy. Russian analyst Anatoly Nesmiyan estimated that, under the current conditions of the Russian oil industry, nearly half of the closed wells would be impossible to restart later. Vakulenko, the former Gazprom Neft executive, disagreed, saying that Russia revived production after a slowdown caused by the Covid pandemic and that it has sufficient equipment and expertise to manage its wells. Either way, Russia is trying to signal it has the patience and resolve to continue the war in Ukraine indefinitely, said Eric Green, who served as senior director for Russia in the Biden White House. 'That is probably partly bluster," he said. 'But there is also an element of truth to that, given Putin's obsession with Ukraine over the last several years." Write to Yaroslav Trofimov at and Thomas Grove at
Mint
8 minutes ago
- Mint
How Switzerland's Tariff Drama Swung From Hope to Despair
(Bloomberg) -- On July 4, as the US celebrated Independence Day, Switzerland's top circle of ministers also had reason to rejoice. They'd secured a deal to avoid punitive tariffs from Donald Trump — or so they thought. Three and a half weeks passed before Swiss President Karin Keller-Sutter or anyone else in the cabinet realized things were about to go horribly wrong. When Trump announced his tariff verdict, Switzerland was handed the highest levies in the developed world. The shock hit just hours before the country's own national holiday on Aug. 1, prompting Keller-Sutter to make a last-ditch trip to Washington to rescue the situation. Instead, she was ghosted by the White House. 'We had, on the 4th of July if I recall, no signs that there would be a problem,' Vice President Guy Parmelin said on Thursday, the day a very different reality descended on Switzerland with the imposition of 39% tariffs — more than double the European Union's rate. The disastrous outcome brought home Switzerland's lack of leverage in an era of global instability and the misguidedness of trusting conventions when dealing with Trump. It leaves Swiss executives trying to figure out how to compete in the world's biggest market and voters wrestling with the future of the country's go-it-alone strategy. This account of how Switzerland went from 'the front of the queue' for a deal with the US to an economic nightmare is based on conversations with multiple people in Bern, Zurich and Washington, who requested anonymity describing private discussions. The Swiss government declined to comment on the details of the negotiations. The White House and Commerce Departments did not immediately respond to requests for comment and the Treasury Department declined to comment. On April 24, three weeks after Trump announced his sweeping tariffs on the world, Parmelin and Keller-Sutter met with US Treasury Secretary Scott Bessent in Washington. Afterward, she announced that Switzerland was set to get 'somewhat preferential treatment.' At this point, the Swiss believed they were on firm ground with the US president, because of the small size of their economy and the fact that they abolished industrial tariffs. Switzerland could give Trump a quick win, an adviser on the Swiss side said at the time. And with Bessent and others, the often-fickle president was surrounded by people who understood the country wasn't problematic. The Swiss plan included concessions on some agricultural products and easier approvals for US medical devices. They also pointed to billion-dollar investments national pharma giants Roche Holding AG and Novartis AG have pledged. In return, they sought a 10% tariff and a pledge that Trump won't put punitive levies on medicines in his national-security investigations. In May and June, the office of US Trade Representative Jamieson Greer held more than 20 rounds of talks with the Swiss. Negotiations occurred frequently via video calls, sometimes even by WhatsApp. Bessent was looped in, and on June 23, Keller-Sutter had a phone call with him and said they're close to an agreement. A few days later, there was a draft. It contained a clause that Swiss drug makers would no longer seek to source certain ingredients from China. There's different understandings of what happened next. Some people said that Bessent, Greer and Commerce Secretary Howard Lutnick signaled to Swiss negotiators that they'd support the accord in front of the president. Others said the US officials made clear to their Swiss counterparts they would simply brief the president on the positives and negatives of a potential deal but the final decision rested solely with Trump. The idea that there was a completed deal that US Cabinet Secretaries pushed to Trump is inaccurate, one of the people said. In Bern, Keller-Sutter and her fellow ministers still hadn't heard directly from Trump. But they decided to rely on the word of his ministers and gave their formal approval on US Independence Day. Keller-Sutter says that in late July Greer's office told Swiss negotiators that it would be helpful if she asked for a phone call with the US president. She did so. One person familiar with the matter said the Swiss decided on their own to call Trump. The conversation that changed everything for the Swiss started at 2 p.m. Washington time on July 31. After offering congratulations for Switzerland's national holiday the following day, Trump hit Keller-Sutter with an accusation: her nation was stealing from the US, he said, pointing out a trade deficit he rounded up to $40 billion. The Swiss were caught off guard as the bilateral balance hadn't come up in previous talks. They were comfortable they'd defused the issue by noting that the deficit in goods was almost completely offset by imports of services. They also highlighted that the country was the seventh-largest foreign investor in the US. On the phone, the Swiss president — a stoic politician not prone to dramatic gestures or punchy one-liners — took the stance that Switzerland stands by its word and the pre-negotiated draft accord. If there was disagreement, it was no deal over a bad deal. Two different narratives of the call have emerged. One portrays Keller-Sutter lecturing Trump and botching the encounter. The other suggests it was all show and Trump had made up his mind to hit Switzerland before picking up the phone. The truth might lie in the middle. Unlike some other leaders, Keller-Sutter is not one to opt for pomp and flattery, like NATO Secretary-General Mark Rutte has done to woo the US leader. 'We will not make promises we cannot keep,' Keller-Sutter told reporters when asked if she should have followed such a negotiating style. But Trump also may have wanted to make an example of Switzerland after facing criticism for caving in on tariffs, especially against big countries like China. 'The woman was nice, but she didn't want to listen,' Trump later told CNBC. On Aug. 1, Keller-Sutter tried to show a brave face. Speaking on the Rütli meadow — a field overlooking Lake Lucerne where, according to legend, Switzerland's founding fathers swore to protect each other from foreign powers — she said the nation can handle the crisis. 'Switzerland is used to storms,' Keller-Sutter told the crowd. 'I don't want to give this too much room today — this is our day, the day of the Swiss people.' Given the shock, that was a big ask, and critics quickly descended on the president, blaming her for not joining other countries in throwing Trump a token to allow him to claim victory, or at least having a Plan B. With just days before the start of tariffs on Thursday, the government focused on diplomacy rather than retaliation. Negotiators sought contact with US counterparts with an improved offer. Options ranged from extended investment pledges to purchases of US defense goods and liquefied natural gas. On Tuesday, with two days to go, Keller-Sutter made a surprise trip to Washington. But it was a desperate attempt. As her plane took off from Dübendorf Air Base near Zurich, she had no invitation to meet Trump. She returned empty handed after only a courtesy meeting with Secretary of State Marco Rubio, who doesn't lead negotiations on trade deals. It was her only official encounter with the US administration. One hour before her plane landed back in Switzerland, the tariff kicked in and the storm started to unfold. Swiss companies initiated emergency plans to relocate production elsewhere to avoid the levies or pause deliveries to the US. While the Swiss government is keeping a delegation in Washington to pursue concessions, the steadfast faith on the country's exceptionalism is now broken. 'In negotiations, such breaks can happen,' Keller-Sutter told reporters. 'One has to live with that and carry on.' --With assistance from Jordan Fabian and Catherine Lucey. More stories like this are available on
Mint
8 minutes ago
- Mint
Zelenskiy Rejects Giving Up Territory to Russia for Peace
Ukrainian President Volodymyr Zelenskiy said Kyiv won't cede territory to bring an end to war but is ready to work with US President Donald Trump for real and lasting peace. 'Ukrainians will not give their land to the occupier,' Zelenskiy said in a post on Telegram and X that also called any deal reached without Kyiv's involvement as a 'dead solution.' Trump announced on Friday that he'll meet Russian President Vladimir Putin in Alaska on Aug. 15, with the apparent exclusion of Zelenskiy from talks aimed at ending Russia's invasion of its neighbor, now well into its fourth year. Senior officials from Ukraine, the US and Europe are set to meet in the UK ahead of Trump's summit with Putin, according to people familiar with the plan. The comments were Zelenskiy's first response to news of that meeting as well as reports that talks between Washington and Moscow center around a deal that would lock in Russia's occupation of territory seized during its military invasion, according to people familiar. That includes a demand by Putin that Ukraine cede Crimea, which Kremlin forces illegally annexed in 2014, as well as its entire eastern Donbas area. It would require Zelenskiy to withdraw troops from parts of the Luhansk and Donetsk regions still held by Kyiv. Any decisions taken without Ukraine 'are at the same time decisions against peace. They will not achieve anything,' Zelenskiy said. 'The answer to the Ukrainian territorial question is already in the Constitution of Ukraine. No one will and will not be able to deviate from this.' Ukraine is ready to work with Trump and 'all our partners' for a 'peace that will not fall apart because of Moscow's desire,' Zelenskiy said. Amid preparations for talks, Russia and Ukraine continued to trade air attacks overnight. Through 8 a.m. Moscow time, Russia shot down a total of 118 Ukrainian drones over its territory, according to nation's defense ministry. Two UAVs targeting Moscow were downed in the morning, Russian capital's mayor said in Telegram posts. Ukraine's air forces on Telegram reported 47 drones and two Iskander missiles fired by Russia overnight. According to preliminary data, as of 9:00 a.m. local time, air defenses had repelled one Iskander missile and 16 UAVs. This article was generated from an automated news agency feed without modifications to text.
