Potential tariffs imposed by Trump could influence Russia to cease its ongoing war
In a significant move, the US has given Russia a new ten-day ultimatum to sign a ceasefire agreement in Ukraine, threatening to impose 100% tariffs if Russia fails to comply by next Friday. This decision could have far-reaching implications for Russia's ability to fund its ongoing war in Ukraine.
The proposed tariffs would not only affect direct trade between the US and Russia but also impact countries that continue to trade with Russia. The EU, for instance, has recently announced a new batch of sanctions aimed at making it harder for Russia to transport its oil around the world. These sanctions lower the price cap to $47 per barrel and blacklist more than 100 vessels from the shadow fleet, preventing them from docking at ports across the EU.
The US's aggressive stance could potentially jeopardize Turkey's eagerness to work alongside the US as a mediator. Unleashing 100% tariffs on Turkey for buying Russian oil could strain relations and undermine Turkey's role in recent US efforts to broker a peace deal to end the war in Ukraine.
China, a major trading partner of Russia, imported a record high of 108 million tonnes of Russian crude oil last year, accounting for about 20% of all Chinese oil consumption. Estimated to be worth about $62bn in 2024, China's reliance on Russian oil could set off a new trade war if the US imposes high tariffs on China for trading with Russia.
Turkey, the world's largest importer of Russian oil products such as diesel, heating oil, and jet fuel, could also feel the heat. Tariffs would increase the cost of imported goods, raising production costs, decreasing industrial output, and slowing down economic growth in Russia. This economic slowdown could limit Russia's government's financial ability to sustain large-scale military spending, thereby impacting its war funding.
Furthermore, the US's extended tariffs to Russia's trading partners could signal a broader economic isolation campaign. Countries that trade with Russia could face punitive costs, disincentivizing them from maintaining economic ties with Russia. This economic isolation could further squeeze Russia's economy and limit its ability to circumvent direct sanctions by rerouting trade.
However, Russia might attempt to find alternative trading partners or develop domestic capabilities to mitigate the effects of tariffs. Yet, this process takes time, and the loss of Western trade and technology under a comprehensive 100% tariff regime may not be fully compensated.
According to the Centre for Research on Energy and Clean Air, Russia has made more than €920bn on exports of fossil fuels since the start of its full-scale invasion of Ukraine. Imposing 100% tariffs could deny Russia much-needed revenue for its war efforts, potentially crippling its ability to fund ongoing military campaigns in Ukraine.
In conclusion, the imposition of 100% tariffs by the US on Russia and its trading partners could exacerbate economic isolation, reduce government revenues, and undermine Russia’s capacity to fund its war efforts. The exact impact depends on how broadly and effectively such tariffs are enforced and how Russia and its allies respond.
Meanwhile, Turkey has played a key role in recent US efforts to broker a peace deal to end the war in Ukraine, mediating three brief face-to-face meetings between Russian and Ukrainian negotiators in Istanbul since May. India, another significant player, buys more than two million barrels of oil a day from Russia, accounting for about 35% of India's oil imports. India's reaction to the 25% tariffs on its imports from the US has been to engage in trade talks.
The Kremlin has been quite clear that it plans to weather new sanctions, but the economic pressure from tariffs could force smaller economies that buy Russian oil imports to buy elsewhere, denting the Russian state's war economy in the months ahead. The next few weeks will be critical in determining the effectiveness of the US's economic strategy and its impact on Russia's war in Ukraine.
The 100% tariffs imposed by the US could have a significant impact on the oil-and-gas industry, specifically Russia's ability to fund its ongoing war in Ukraine, given the large revenue generated from fossil fuel exports. The tariffs could potentially jeopardize Turkey's relationship with the US, as Turkey is a significant importer of Russian oil products.
The US's economic strategy could also signal a broader campaign of economic isolation, potentially impacting countries that continue to trade with Russia, as seen in the EU's recent sanctions aimed at making it harder for Russia to transport its oil.
The economic pressure from these tariffs could force smaller economies that rely on Russian oil to change their trade patterns, thereby denting the Russian state's war economy. Turkey, India, and other countries purchasing Russian oil might consider other trading partners or domestic capabilities to mitigate the effects of tariffs.
Policy-and-legislation and politics will play a crucial role in determining the effectiveness of the US's economic strategy and its impact on Russia's war in Ukraine, as world powers navigate this complex geopolitical landscape. General-news outlets will closely monitor the developments in this region for updates on policy changes, trade relations, and potential war-and-conflicts escalation.
