Europe
Russia is unmoved by Trump’s sanctions threats and offers on war
Bloomberg News
February 21, 2025
Police officers patrol Red Square, near the Kremlin, in Moscow, Russia. (Andrey Rudakov/Bloomberg)
Russia doesn’t view sanctions relief as a critical factor in negotiations to end the war and isn’t expecting any significant easing of U.S. penalties, according to a person close to the Kremlin.
Officials and some major companies view Russia’s current trade partners, including China and India, as more predictable and don’t expect a restoration of pre-war economic ties with the West, the person and several business people said, declining to be identified discussing sensitive matters.
Secretary of State Marco Rubio told European allies that the U.S. will keep sanctions on Russia in place at least until a deal to end the Ukraine conflict is reached, following talks between top U.S. and Russian officials in Saudi Arabia on Tuesday. There wasn’t a discussion in Riyadh about lifting them, Rubio told a journalist, according to a State Department transcript.
U.S. President Donald Trump has said he’ll probably meet his Russian counterpart Vladimir Putin to discuss a settlement before the end of February, something the Kremlin hasn’t ruled out. The U.S. is signaling that sanctions relief for Russia could be on the table in talks as Trump rushes to secure a resolution to the conflict. Treasury Secretary Scott Bessent said Thursday the U.S. is prepared to either ramp up or take down penalties based on the Kremlin’s willingness to negotiate.
It’s too early to discuss the terms of any possible negotiations, including on sanctions, Kremlin spokesman Dmitry Peskov said, in response to a request to comment.
The U.S. and its Group of Seven allies hit Russia with unprecedented sanctions after Putin ordered the February 2022 full-scale invasion of Ukraine, seeking to cripple the Kremlin’s economy and its ability to wage war. With the conflict reaching its three-year mark on Monday, the economy has proved much more resilient than many Western analysts expected, and Russian businesses have adapted to the restrictions including by switching from the dollar and euro to trade in China’s yuan.
Putin has repeatedly demanded that Ukraine must never join NATO and that a deal to end the war should recognize the “realities on the ground” with his forces occupying large areas of territory in the country’s east and south. Trump has already indicated a willingness to accept some of these terms.
Russia would welcome the removal of some banks from the U.S.’s blacklist to help businesses overcome cross-border payment difficulties for goods and to trade in dollars, while lifting sanctions on almost 200 tankers carrying Russian oil would ease energy sales, according to the person close to the Kremlin.
Trump waved the stick after his inauguration last month, threatening “big” new sanctions and to crash the oil price to wreck Russia’s economy unless Putin agreed to make a quick deal to end the war.
“There is no sanctions bazooka any more” and the U.S. has only limited options for new measures without disrupting global trade, said Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center. Additional penalties such as sanctioning more tankers “will be painful for the Russian economy, but not critical” and “such measures will not stop Putin,” she said.
Russia’s military is continuing to advance on the battlefield in eastern Ukraine, giving Putin little reason to agree to a temporary ceasefire. He ruled out such a truce in December, saying Russia wanted long-term guarantees to halt the war.
Europe was Russia’s key trade partner until it broke ties when the war started, and China is likely to retain that position now, said two top executives in Russian commodity companies.
That highlights another challenge for Trump in using sanctions as leverage to push Russia into a deal to stop the war. European Union sanctions would remain in place unless the president also persuaded Brussels to ease penalties alongside the US.
“In a number of areas, the lifting of U.S. measures while maintaining EU sanctions wouldn’t lead to a significant change in the picture,” said Oleg Kuzmin, head of research at Renaissance Capital.
There’s also the question of some $300 billion of frozen Russian central bank reserves, most of which is held in Europe. Even as Russia has shown it can operate normally without those funds, Trump doesn’t have that asset to put forward for release in negotiations.
In the U.S., too, several new sanctions imposed by the outgoing Joe Biden administration could trigger a review by Congress if Trump tries to remove them. Easing penalties on Russia’s oil and gas sectors would contradict Trump’s stated goal of U.S. energy dominance, making it even less appealing, said Edward Fishman, a former State Department official who worked on Russia sanctions in 2014.
“Were Trump to go down that path, it would trigger a 30-day period in which Congress would have the chance to vote down the lifting of sanctions,” Fishman said.
Russia’s energy sector accounts for about 30% of revenue to the state budget and has been the target of Western sanctions in the past three years, including a $60 price cap that barred access to key services such as insurance and shipping for oil sales above that level. Yet Russia adapted by finding new markets such as India, widening oil discounts to customers and building a shadow fleet of vessels to ship cargoes.
The impact of sanctions was significantly more visible in the liquefied natural gas sector, where U.S. bans effectively halted exports from the Novatek-run Arctic LNG 2 facility and put construction of new production facilities in limbo.
Still, high crude prices, a weakening ruble and amended tax rules helped the Kremlin’s oil and gas revenues to reach their highest last year since at least 2018.
After the U.S. imposed its most aggressive sanctions package early last month, Russia’s seaborne oil exports have remained robust, ship-tracking data compiled by Bloomberg show. The restrictions will likely have only a muted effect on Russian crude output, the International Energy Agency said in its latest oil-market report.
Unilateral U.S. sanctions relief “would significantly undermine the effectiveness of sanctions against Russia, given the extraterritorial reach of U.S. sanctions and the primacy of the dollar, while creating massive loopholes,” said Maria Shagina, senior research fellow for economic sanctions, standards and strategy at the International Institute for Strategic Studies.
Still, “it could be a wake-up call for the EU and the U.K. to abandon an incremental approach and ratchet up sanctions pressure,” she said.
With assistance from Alberto Nardelli, Daniel Flatley and Julian Lee.