AYESHA RASCOE, HOST:
The Trump administration has imposed a fresh round of sanctions on Russia. The new measures announced last week target the heart of Moscow's economy, its oil industry. The move follows President Trump's faltering efforts to end the war in Ukraine. To tell us more about the possible impact of the sanctions, we turn to Stephanie Baker. She's a senior writer at Bloomberg and the author of "Punishing Putin: Inside The Global Economic War To Bring Down Russia." Welcome to the program.
STEPHANIE BAKER: Thanks for having me.
RASCOE: Can you explain, just how do these new sanctions work?
BAKER: Right, so these sanctions that the Trump administration has rolled out are targeting Russia's two largest oil producers, Rosneft and Lukoil. They are barring these two producers from using the U.S. dollar financial system, and the oil market trades principally in U.S. dollar. So this is a huge deal, a very significant move that will impact Russia's ability to earn profits from its oil exports.
At the moment, Russia sells 85% of its oil to China and India. And you have refineries in China and India who are very wary of importing Russian oil given these U.S. sanctions for fear that Washington will turn around and sanction them.
RASCOE: So it sounds like what you're saying - that even though Russia's been able to weather previous sanctions and continue its war in Ukraine, is this round different?
BAKER: This is huge because they're targeting Russia's two largest oil producers that account for half of Russia's oil exports. So this is the real significant move that needed to happen to put real economic pressure on Putin to come to the negotiating table.
And you already see that Russia is reacting to this. They've sent their special envoy, economic envoy, Kirill Dmitriev, to the United States to meet with Trump's envoy, Steve Witkoff. And that shows the degree of concern that I think is in Moscow because of this move.
RASCOE: If this oil is taken off of the market and it represents about 10% of global oil production, how does the global oil market, which affects all of us - how does that sustain itself? Are there other places that could make that up?
BAKER: I think the reason why the Trump administration moved on this is that there is more capacity in the oil markets now. Prices have come down considerably. The Saudis are pumping more oil. OPEC countries are pumping more oil, and there's been signals that they're willing to step in and cover any shortages. So I think that's one of the reasons why they decided to take this move, that the blowback and impact on the U.S. economy would be less.
RASCOE: Well, Ukraine's been targeting the Russian oil industry with long-range strikes against its refineries. What is the state of the Russian economy now? Can it keep taking all of this pressure?
BAKER: Yes, Ukraine has been frustrated by the unwillingness of the U.S. and Europe to really effectively sanction Russian oil, so they've taken matters into their own hands and used drone strikes to damage oil refineries in Russia. And as a result, there are widespread fuel shortages in Russia that is contributing to inflation. The overall Russian economy is slowing after record spending on defense and security. It's still suffering from sticky high inflation and high interest rates, and it really needs these Russian oil revenues to continue to finance the war.
RASCOE: And President Trump - he announced these sanctions after he called off a summit with Russian President Vladimir Putin that was supposed to take place in Budapest. Where does this leave the U.S.-Russian relationship?
BAKER: Well, officially, Secretary of State Marco Rubio has said he's leaving the door open for continued talks. But I think this was a realization that Putin had not changed his maximalist goals on controlling all of Ukraine and that the time was finally right to try to put some pressure on Putin to come to the negotiating table. And one way of doing that is to really hit Russian oil revenues and its ability to finance the war.
RASCOE: Do you think these sanctions make an end to the war more likely?
BAKER: It all depends on enforcement. This is key. Whether the Trump administration signals that it will target, you know, refineries, banks that do business with these two major Russian oil producers with additional sanctions, that would really scare people away from buying Russian oil. It could drive more Russian oil into a sort of black market. Russia already uses a shadow fleet of oil tankers to transport oil, but it will still probably result in deep discounts and lower revenues for the Kremlin.
RASCOE: That's Stephanie Baker, senior writer at Bloomberg. Thank you so much for joining us.
BAKER: Thanks for having me. Transcript provided by NPR, Copyright NPR.
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