The Biden administration has unleashed its toughest sanctions to date on Russia, targeting Moscow’s prized energy sector and its elusive “shadow fleet” of oil tankers.
The United States Oval Office rolled out a package of measures aimed squarely at crippling Russia’s ability to fund its war in Ukraine. Treasury officials labeled these actions the “most aggressive” since the start of the invasion, with over 180 tankers blacklisted, along with Russian oil giants Gazprom Neft and Surgutneftegas.
For years, President Biden has avoided a full-on assault on Russia’s energy exports, fearing global oil prices would skyrocket and leave Americans footing an even higher gas bill. But with inflation cooling off and global oil supplies looking healthier, the administration decided to hit Putin where it hurts most: his oil profits.
The crackdown on Russia’s shadow fleet
If there’s one thing Putin’s Russia knows how to do, it’s evade sanctions. Enter the shadow fleet—a murky network of aging oil tankers, often flagged in obscure countries, designed to smuggle Russian crude around the world while thumbing its nose at Western sanctions.
For the Kremlin, this clandestine fleet has been a lifeline, hauling oil to markets like China and India despite global restrictions. Now, America’s Treasury Department has made it clear this party is over.
To make life even harder for Putin, the sanctions also hit liquefied natural gas projects and key players in the Russian energy ecosystem, from engineers to financiers.
Oil prices, global markets, and the next administration’s headache
The effect of Biden’s sanctions was felt almost immediately. Oil prices spiked on Friday as markets braced for potential supply disruptions. Combine that with extreme weather in the U.S. and ongoing wildfires in California, and it’s easy to see why traders were sweating bullets.
Yet Biden’s team insists that the global oil market is stable enough to weather the storm. The timing of these sanctions is amusing for another reason though.
See, these guys are about to hand the baton to the Trump administration, and they know that this would likely strain his and Putin’s relationship some more and make it hard for them to get along as they want.
When the war started in February 2022, economists predicted a total collapse of the Russian economy. That didn’t happen. High oil prices and crafty trade deals with countries like India and China have kept Russia’s coffers filled, at least for now.
But Biden’s new sanctions go deeper than previous attempts. For Putin, this is literally billions in lost revenue every single month.
Russia’s economic reality
Russia’s economy has taken a beating since the war began. Back in 2022, the International Monetary Fund (IMF) predicted an 8.5% drop in Russia’s GDP. But by the end of the year, the actual decline was a modest 2.1%. Why? Because sky-high energy prices cushioned the blow.
Fast-forward to 2023, and Russia even managed to post a 2.2% growth rate. Sounds impressive until you dig deeper. That growth came from selling oil and gas at discounts to non-Western markets like China and India.
Meanwhile, sectors like technology and defense were in shambles, and long-term investments dried up faster than a puddle in the Sahara. By 2024, cracks in the foundation were impossible to ignore. Inflation soared to 15%, and the ruble nosedived against major currencies.
Businesses were struggling, with over 200 shopping centers on the brink of bankruptcy. Freight haulers, who move goods across what’s the largest country on earth, warned of insolvency. The U.S. Treasury estimated that sanctions had shaved 5% off Russia’s potential GDP growth.
For ordinary Russians, the pain is real. Consumer prices are through the roof, wages are stagnant, and job prospects are grim. Over a million people—many of them young professionals—have fled the country since the war began.
Business elites are fed up with policies that prioritize military spending over profitability. Kremlin insiders are reportedly grumbling about the unsustainable costs of the war. Even loyalists are beginning to question Putin’s long-term strategy.
Meanwhile, the population is growing restless. Years of economic stagnation, coupled with rising prices, have taken their toll. Public discontent is bubbling under the surface, and it’s only a matter of time before it boils over.
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Source: https://www.cryptopolitan.com/biden-hit-putin-russia-with-harshest-tariffs/