Surprise sanctions by the Trump administration on Russia's two largest companies pushed oil prices sharply up on Thursday, prompting India to reconsider cutting Russian oil imports, as the Ukraine peace talks, initially planned to be held in Budapest, were canceled.
The sanctions, unveiled by the U.S. Treasury on Wednesday, target oil companies Rosneft and Lukoil, and mark a dramatic U-turn by U.S. President Donald Trump, who said only last week that he and Russian President Vladimir Putin would hold a summit in Budapest to try to end the war in Ukraine.
But in his latest turnaround on the conflict, Trump said on Wednesday the planned summit was off because he did not believe it would achieve the outcome he wanted and complained that his many "good conversations" with Putin did not "go anywhere."
The major shift in U.S. policy pushed global oil prices up 5% by Thursday midday. Brent crude futures were up $3.39, or 5.4%, at $65.98 a barrel at 10:18 GMT, while U.S. West Texas Intermediate crude futures were up $3.31, or 5.7%, at $61.81.
"We canceled the meeting with President Putin – it just didn’t feel right to me," Trump told reporters at the White House. "It didn’t feel like we were going to get to the place we have to get. So I canceled it, but we’ll do it in the future.”
U.S. Treasury Secretary Scott Bessent made it clear Washington stood ready to take further action and was targeting Russia's ability to fund a war it launched in February 2022.
"Given President Putin’s refusal to end this senseless war, Treasury is sanctioning Russia’s two largest oil companies that fund the Kremlin’s war machine," Bessent said in a statement. "We encourage our allies to join us in and adhere to these sanctions."
Russia's Foreign Ministry called the U.S. sanctions "counterproductive" when it came to finding a peace deal and said its goals in Ukraine remained unchanged.
Oil and gas revenue, which is currently down by 21% year-on-year, accounts for around one quarter of Russia's budget and is the most important source of cash for Moscow's war in Ukraine, now in its fourth year.
However, Moscow's main revenue source comes from taxing output, not exports, which is likely to soften the immediate impact of the sanctions on state finances.
Ukrainian President Volodymyr Zelenskyy thanked the U.S. for the new sanctions, saying they were "very important" but that more pressure would be needed on Moscow.
Oil prices jumped more than 3% on Thursday amid worries that the sanctions would disrupt global supply. Indian oil industry sources told Reuters that Indian refiners were poised to sharply curtail imports of Russian oil to ensure they were in compliance with U.S. sanctions.
India has become the biggest buyer of seaborne Russian oil sold at a discount after Western nations shunned purchases and imposed sanctions on Moscow following the 2022 invasion of Ukraine.
The U.S. Treasury has given companies until Nov. 21 to wind down their transactions with the Russian oil producers.
Some analysts say that the new sanctions could force Russia to further discount its oil on world markets to offset the perceived risk of U.S. secondary sanctions, but that pain could in turn be mitigated if global oil prices rise, supporting the state's finances and the ruble.
After an August summit with Putin in Alaska, Trump dropped his demand for an immediate cease-fire in Ukraine and embraced Moscow's preferred option of going straight to negotiating an overall peace settlement.
But in recent days, he has reverted to the idea of an immediate cease-fire, something that Kyiv supports but which Moscow, whose forces are steadily edging forward on the battlefield, has repeatedly made clear it has no interest in.
Russia has said it opposes a cease-fire because it believes it would only be a temporary pause before fighting resumes, giving Ukraine time and space to re-arm at a time when Moscow says it has the initiative on the battlefield.
In a show of force on Wednesday, Moscow conducted a major training exercise involving nuclear weapons.
Russia argues that negotiating a full peace settlement that paves the way for what it calls a "long-lasting peace" is therefore a better option.
But Kyiv has said that Russia's conditions for a settlement – which would entail Ukraine handing over more land – were unacceptable and, in effect, a demand for it to surrender.
