Trump's oil tactic: A gamble on ending the Russia-Ukraine war
The US President has limited options to pressure the Kremlin to end the war, with the main strategy being the continued support of Ukraine with military supplies, according to analysts. For over a week, there has been an exchange of views between the leaders of Russia, the United States, and Ukraine's President, Volodymyr Zelensky.
Speaking at the World Economic Forum in Davos, Donald Trump stated "If the price came down, the Russia-Ukraine war would end immediately." He also announced plans to negotiate with Saudi Arabia and OPEC to lower oil prices.
- Saudi Arabia's budget anticipates a significant deficit, with public debt nearing 30% of GDP. Unlike the late USSR, which fell due to Saudi oil dumping, the Saudis require oil prices of at least $98 per barrel to balance their budget - explains one Russian analyst.
Trump apparently suggests he might attempt to replicate Ronald Reagan's strategy of lowering oil prices globally, which bankrupted the USSR. However, today's global situation is significantly more complex.
The Saudis are pursuing an ambitious investment plan that strains their budget while maintaining military cooperation with Russia. Following the outbreak of the war in Ukraine, Riyadh received dozens of Pantsir-1 air defence systems from Moscow. The Russian army needed these at the front, but the Kremlin considered it more advantageous to cultivate good relations with the Saudi regime.
Ineffective threats
The Kremlin does not respond to Trump's threats. As Russian Deputy Foreign Minister Aleksandr Grushko notes, " We will not only seek ironclad international guarantees that will prevent Ukraine’s membership in NATO in any form, but we will also insist it will become a policy of the alliance itself." This refers to obtaining guarantees that Ukraine will not join NATO.
- Welcome again to the turn of 2021 and 2022 – commented Carnegie Foundation expert Tatiana Stanovaya, highlighting Putin's reprise of demands from late 2021 about the future European security architecture, centred on two main principles: no Ukraine in NATO and no NATO in Ukraine.
Putin's tactics have shifted: instead of issuing sharp ultimatums, he focuses on softening Trump's stance and appealing to his ambitions. It's worth noting that Putin publicly supported Trump's claim of the "stolen" 2020 elections, which sparked outrage among the Russian opposition.
What will NATO do?
President Zelensky suggests that NATO send peacekeeping forces to Ukraine after military operations conclude. "Foreign Policy" notes that the Alliance has two options: offer Ukraine long-term financial and military support or extend article 5 guarantees of its treaty to Ukraine. The Kremlin is strongly opposed to both options.
It is still uncertain how a truce could be reached. Kyiv expects hostilities to cease at the pre-aggression border as of February 24, 2022, while Putin claims the war's objectives have already been achieved, including the weakening of the Ukrainian army and securing a "land corridor to Crimea". If Zelensky's demands were met, the Kremlin would have to relinquish this "corridor".
So far, there is no sign of a willingness to compromise from either side. Trump has limited foreign aid provided by the US, excluding military support for Ukraine. Meanwhile, Washington continues to exert "energy pressure" on Russia. General Keith Kellog, Trump's special envoy for Ukraine, believes it is possible to lower oil prices to $45 per barrel, which could weaken Russia's financial resilience and force the Kremlin to seek an agreement.
However, as Timothy Ash of Chatham House noted, a prolonged war won't particularly harm Trump, while it will become increasingly challenging for Putin to maintain the situation the longer the conflict persists.
