How Trump helped Putin to billions – and prolonged Ukraine war

 Donald Trump’s suspension of sanctions on Russian oil sales was meant to ease the global energy crisis but may have had unintended consequences to the benefit of Vladimir Putin.

The closure of the Strait of Hormuz, through which about 20 per cent of the world’s oil and gas had been shipped daily before the conflict, has seen oil prices spike at approximately $120 per barrel for Brent crude oil and cause the biggest oil supply disruption in history according to the International Energy Agency.

Motorists have faced rocketing prices at the pump, airlines have been forced to cut flights as jet fuel shortages loom, and farmers in the UK have warned of food price increases as they grapple with a surge in diesel and fertiliser prices.

In a bid to head off the crisis, Trump issued a 30-day waiver in March, a reprieve from oil sanctions, which allowed the sale of Russian-origin crude ​oil and petroleum products already loaded ​on tankers and at sea as of 12 March.

US Treasury Secretary Scott Bessent said the “tailored, short-term” policy would reduce the economic impact of the US-Israel war with Iran.

And as countries around the globe attempted to meet their energy needs in the face of short supply, Russia emerged as an alternative source with its oil in demand.

How much has Putin profited?

Estimates of how much Russia has financially gained from this sanction reprieve have varied.

Analysis by the Financial Times puts it at between $3.3 and $4.9bn (£2.4-£3.6bn) in overall additional revenue by the end of March. This was based on industry data and the assumption that Russia’s Urals crude prices averaged around $70-$80 a barrel.

Bloomberg reported this week the price of Urals crude jumped to more than $116 per barrel last week, its highest level since 2013. And Alexei Tretyakov, CEO of AriCapital, said Russia could collect around 1 trillion rubles ($12.7 billion) in oil and gas revenues in April, about twice as much as in January and February and 40 per cent more than in March.

Charles Hecker, associate fellow at the Royal United Services Institute (Rusi) and author of Zero Sum; The Arc of International Business in Russia, told The i Paper these figures are not definitive, but still significant for a struggling Russian economy.

He said “finances are normally opaque to begin with” until the ministry of finance releases a report, but he added a rough estimate could be made based on Russia earning roughly $150m a day from oil, which is “a significant amount of money”.

Roxanna Vigil, fellow at the US think tank Council on Foreign Relations and former US treasury Sanctions advisor said the dynamic of the sanction has now switched in favour of Russia.

She told The i Paper: “I would say where they will see the biggest benefit is the higher prices they can charge instead of having to sell at a discount.”

“The waiver has basically flipped the dynamic. Instead of Russia having to accept the discount, it is in a better negotiating position where it can set the price.”

War in Ukraine

Where this money will help is with Russia’s “special military operation” in Ukraine.

“The sanctions were supposed to be a pressure valve to put pressure on Putin to get him to end the war in Ukraine”, said Vigil, “and now part of that pressure has been alleviated.

With a fresh injection into the economy from the sale of oil, Putin has cash to splash.

“Russia can use this money to fund the war in Ukraine”, said Hecker, “They can spend on weapons, they can spend on recruits, they can spend on repaying the national debt or topping up the rainy day fund.”

For a nation at war struggling to staff its military, manpower has become a major issue.

Russian forces have suffered nearly 1.2 million casualties since February 2022, according to the Centre for Strategic and International Studies.

Reports suggest the Kremlin has turned to recruiting students from Russian universities.

Russian Minister of Higher Education Valery Falkov has offered students academic leave and contracts for a minimum of one year.

A new motivation for Russian’s to enlist could now come from the offer of more pay.

“Now they can probably increase the money paid to people to get them to sign up,” said Hecker.

‘Swagger on the energy markets’

With Russian oil in demand, Putin has also been able to regain some footing on the global stage and influence the trade of oil.

Russia has previously been selling oil at a discount due to the price cap imposed as part of sanctions which also forced countries to purchase oil elsewhere.

“It has given Putin a bit of swagger on the energy markets,” Hecker said. “He can say, we should be looking into getting a higher price for our oil.

“I think even if the waiver ends, as long as oil prices remain high, he will feel empowered and Russia will feel empowered as a player on the energy markets. Supply is going to be very tight.”

Damage to oil and gas production infrastructure in the Middle East has affected supply and that “puts Putin in a more powerful position and Russia in a more powerful position”.

More than 60 energy facilities are reported to have been struck across the Persian Gulf since the conflict began, targeting refineries, oil fields, ports and gas plants. These include Qatar’s Ras Laffan oil-and-gas complex and Bahrain’s Sitra refinery, according to data compiled by JPMorgan Commodities Research and reported by MarketWatch.

The 30-day waiver allowed countries to buy up Russian oil, which under sanctions had been floating at sea unable to be sold.

However, Russia’s financial windfall appears to be less to do with the lifting of sanctions and more about surging oil prices.

“What is helping Russia is the rising oil prices”, said Hecker, “as long as oil stays expensive, Russia does better”.

Economic boost

The waiver has put more cash into Russia’s coffers, but it has not solved all its economic issues. The Russian budget is still running a deficit.

“It’s not a cure-all for Russia”, said Hecker. “Ukraine has damaged some of Russia’s refining and exporting capacity and so Russia has not been able to export all of the oil it may have wanted to because of damage to infrastructure.

“Secondly, the Russian economy is suffering from structural problems that can’t alone be solved by this cash.

“There is a labour shortage, cash can’t help with that.”

Ukraine has also been targeting Russian ports in its recent attacks. On Tuesday, Ukraine’s military confirmed it had hit the Ust-Luga Oil terminal in the Leningrad region, the largest port terminal in Russia for transshipment of petroleum products, damaging three storage tanks.

It comes after Ukrainian drones targeted an oil terminal in the southern Russian port of Novorossiysk earlier this month.

Reuters reported last month that, based on market data, at least 40 per cent of Russia’s oil shipping capacity had been stopped after repeated Ukrainian drone attacks.

This has hit Russia’s ability to export oil, which in turn creates an oil storage problem and has a knock-on effect for oil production.

Russia is reported to be contemplating production cutbacks because it can’t export and its storage space is reaching capacity.

“It’s hard for me to calculate whether rising prices would compensate for any production cutbacks but what it means overall is that Russia can’t take full advantage right now of the spike in oil prices”, said Hecker “So the current environment is good for the Russian budget but not as good as it could be.”