Trump leaves Russia sanctions pressure in doubt after Xi meeting

WASHINGTON - US President Donald Trump gave the world an early glimpse of just how loosely he was planning to enforce new US sanctions on Moscow when it comes to China, the single-largest buyer of Russian crude.

In his

high-profile meeting with Chinese leader Xi Jinping

on Oct 30, Mr Trump said the issue didn’t even come up.

“We didn’t really discuss the oil,” Mr Trump said. “We discussed working together to see if we could get that war finished.”

The lack of meaningful pressure on Beijing means oil will continue to be a major source of revenue for President Vladimir Putin’s war effort, despite Mr Trump’s move to unveil his first sanctions on Russia last week – blacklisting state-run oil giant Rosneft PJSC and Lukoil PJSC, Russia’s biggest oil producers.

“If Trump won’t raise Russian oil with Xi, it undermines the entire sanctions narrative – you can’t claim to be tough on Moscow while ignoring one of the largest buyers keeping their economy afloat,” said Mr Brett Erickson, a sanctions expert and managing principal at Obsidian Risk Advisors.

“Trump’s sanctions so far feel performative. If he’s unwilling to confront Xi on energy flows, then the enforcement side of this policy will remain a paper tiger.”

While Mr Trump’s sanctions initially jolted oil markets, declining to even raise the issue with Mr Xi suggests Mr Trump prioritised stabilising US-China ties and securing what he called an “amazing” trade deal with the world’s second-largest economy over strict enforcement. 

Mr Trump had initially said he would raise Chinese oil buying with Mr Xi as part of a renewed bid to end the fighting in Ukraine after he helped secure a fragile truce in Gaza. Ukraine and its allies in Europe had called on Mr Trump to lean on Mr Xi to cut support for Russia’s ongoing invasion. 

After the meeting, Ukrainian President Volodymyr Zelensky struck an optimistic tone despite expressing hope that Mr Trump and Mr Xi could find agreement on curbing Russian energy revenue. In a post on X, he said oil sanctions were already causing “significant losses” and that “principled and consistent pressure” could still deprive Moscow of US$50 billion (S$64.8 billion) per year.

“It is important that China contribute to efforts aimed at stopping Russia’s ongoing attempts to expand and prolong the war,” Mr Zelensky wrote.  

But applying significant pressure on Chinese buyers of Russian oil could have spurred intense retaliation from Beijing, imperiling efforts for a broader deal. 

“Given they had so much to get through in a relatively short period, it’s not surprising this was not a major focus,” said Mr Chris Kennedy, a senior geo-economics analyst at Bloomberg Economics. “In an escalation scenario, China would probably pull multiple levers.”

China has been a vital lifeline for Moscow’s energy industry as Mr Putin’s grinding war in Ukraine prompted rounds of western sanctions.

While China has maintained it does not recognise unilateral US restrictions, its larger companies are wary of getting tangled in secondary sanctions and fear losing access to US financial markets. 

The challenge for Mr Trump is that for the sanctions to have any impact, they will need to be enforced. And enforcing them will mean punishing the main buyers – China and India.

“It’s always in the implementation –  they get to choose whether they’re going to apply it,” Senator Chris Van Hollen, a Maryland Democrat, told an audience at the Council on Foreign Relations this week.

Mr Trump’s new sanctions have already spooked big players in both countries. The US could still increase the pain for Mr Xi by targeting major Chinese oil refiners and trading firms, going after the so-called shadow fleet carrying Russian crude to foreign markets, or by hitting Chinese banks handling the transactions.

Washington has taken similar measures in efforts to target Iranian oil exports, but going hard at China presents more risk if Beijing chooses to hit back. It’s also not clear that lobbying Beijing to halt its economic support for Russia would even be successful, given the previous Biden administration tried and failed. 

“The key here is going to be signaling to market participants that the United States and its partners are serious about enforcement,” said Mr Eric Van Nostrand, who was an assistant secretary for economic policy at the Treasury Department during the Biden administration. BLOOMBERG