The U.S. holds immense leverage over Russia’s economy and ability to continue waging war on Ukraine, but President Donald Trump has backed off from earlier warnings that lack of progress on a ceasefire would result in harsh penalties for Moscow.
Trump and Russian President Vladimir Putin ended their highly anticipated meeting in Alaska on Friday without a deal. On Saturday, Trump shifted his stance toward reaching a more comprehensive peace agreement between Russia and Ukraine, mirroring Putin’s position, rather than a ceasefire.
That marked a big swing from his rhetoric leading up to the Alaska meeting, as he threatened “very severe consequences” for Russia if Putin didn’t agree to a ceasefire.
When asked why he didn’t follow through, Trump said he would hold off on any new penalties and suggested the threat remains on the table as diplomacy plays out.
“Because of what happened today, I think I don’t have to think about that now,” he told Fox News. “I may have to think about it in two weeks or three weeks or something, but we don’t have to think about that right now.”
Trump had previously warned Russia’s oil sector could face secondary sanctions. Oil and gas generate the bulk of the Kremlin’s revenue, and the U.S. could exploit this critical vulnerability.
In particular, cutting off the “shadow fleet” of tankers that deliver Russia’s oil under the radar would send the war economy into a “deep financial crisis,” according to Robin Brooks, a senior fellow at the Brookings Institution and former chief economist at the Institute of International Finance.
After the Biden administration sanctioned nearly 200 ships in January, just before Trump returned to office, their activity collapsed, he pointed out in a Substack post on Saturday.
But there are 359 more ships that have already been sanctioned by the European Union or United Kingdom, but haven’t been targeted yet by the U.S.
“Sanctioning these ships would be a hammer blow to the Russian war machine,” Brooks wrote. “There would undoubtedly be a sharp fall in the Urals oil price, reducing the flow of hard currency to the Russian state, and the Ruble would most likely depreciate significantly.”
Meanwhile, foreign policy expects have called the Alaska meeting a success for Putin as he was able to avoid severe consequences from Trump while also buying time for his military to make more battlefield gains in Ukraine.
But Melinda Haring, a nonresident senior fellow at the Atlantic Council’s Eurasia Center, also noted that Trump has significant leverage over Russia.
“Let’s hope that Trump sees through Putin’s endless appetite to talk and tires of the Russian dictator’s pseudo-historical lectures,” she wrote in a blog post. “Trump can squeeze the Russians; he seems to forget that the United States holds the cards, not Moscow.”
Oil and gas revenue tumbled 27% in July from a year ago, and Russia is running out of financial resources as war-related spending deepens its budget deficit.
The National Wealth Fund, a key source of reserves, has dwindled from $135 billion in January 2022 to just $35 billion this past May and is expected to run out later this year.
“Russia’s economy is fast approaching a fiscal crunch that will encumber its war effort,” economist and Russia expert Anders Åslund wrote in a Project Syndicate op-ed last week. “Though that may not be enough to compel Putin to seek peace, it does suggest that the walls are closing in on him.”
