Trump's options for easing Russia sanctions are limited in comparison to Europe
Donald Trump, the U.S. president, could lift some sanctions against Russia quickly as a way to reward Moscow for successful peace talks with Ukraine. However only Europe can make the larger steps necessary to ease Russia's cash crisis. Trump has threatened to impose additional sanctions and tariffs against Russia and its oil buyers if there are no signs of progress in the three-and-a-half-year long war in Ukraine. If the talks are successful, Trump could start to ease some of his punitive measures.
Trump has a number of options, including releasing Russian assets, reopening U.S. loans to Russian corporations and banks, and allowing U.S. companies that provide oil and gas services to return to Russia’s remote oil and natural gas fields.
Without Europe's help, these measures would only have a limited impact and the worst sanctions, including the massive restrictions on Russia’s global oil trade – the lifeblood to its economy – would remain in place.
About a quarter (25%) of the total budget revenue for Russia comes from oil and gas.
The sector's revenues have dropped sharply
A painful result for Russia, amid increased spending since the start of its military campaign against Ukraine.
"The U.S. has much less to offer unilaterally than the Europeans, who have no reason to give Russia any relief until they reach a satisfactory solution on Ukraine," said Craig Kennedy. Kennedy is an associate of Harvard University's Davis Center for Russian & Eurasian Studies.
The European Union has stated that it will continue to exert pressure on Russia until Moscow ends its war.
Trump's biggest move would be to lift Treasury Department sanctions that prevent U.S. oilfield services companies from working in Russia. This could allow Russia to increase oil and gas production in some of its most difficult to drill places, such as the Arctic. Sources have reported that U.S. officials and Russian officials discussed the possibility of Exxon Mobil entering Russia's Sakhalin-1 gas and oil project. Sakhalin-1 is not directly listed under the extensive U.S. energy sanctions.
Sources said that officials discussed also the possibility of Russia buying U.S.-made equipment for its LNG project, like Arctic LNG 2, which has been sanctioned. The fastest way to alleviate Russia's financial crisis would be if Europe lifted its ban on the import of Russian seaborne crude oil into the area. According to the International Energy Agency, Europe was the final destination of nearly half of Russia’s crude oil and petroleum products exports prior to the invasion of Ukraine.
By reopening this market, Russia could save billions in shipping costs to China and India -- the two main buyers of crude oil.
Washington has no control over this.
The U.S. can theoretically undermine the price cap by ceasing its enforcement efforts. However, Europe will need to work together to make any decisions to lift it.
The EU agreed in September to lower the cap to $47.60 per barrel, from $60, to limit Moscow’s revenue when oil markets are hot without affecting global flows.
FROZEN ASSETS
Both the U.S. & Europe can release assets from the Russian central bank that have been held since the invasion. However, Europe's leverage is much greater. According to Axios, the EU holds about $230 billion in assets while the U.S. identified approximately $5 billion as Russian assets within its banking system.
Trump can only take a few steps without Congress. One of them is returning those assets. The Treasury Department could issue licenses that are kept secret. "Releasing these funds would not be unnoticed (by Russian President Vladimir) Putin, while likely avoiding domestic attention," said Jeremy Paner. He is a former Treasury Department sanction investigator and a partner of Hughes Hubbard & Reed.
The EU also has the upper hand when it comes time to admit Russian banks back to the SWIFT global payment network. SWIFT is based in Brussels, and EU law governs its operation.
The West could increase capital market lending to Russian corporations and banks. Kennedy said that big U.S. bank would not lend large amounts without European counterparts.
Kennedy stated that "European banks have historically led in Russia. They have the expertise and risk appetite." (Reporting and editing by Richard Valdmanis, Ni Williams, Richard Valdmanis; Daphne Psaledakis).
(source: Reuters)
