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The Secondary Sanctions Squeeze

by | Aug 6, 2025

US President Donald Trump is now largely following his predecessors hostile policy towards Russia.

If the war in Ukraine continues on its current path Russia will end it with an outright victory. The US and its European vassals are trying to impose a ceasefire to prevent that. It would give time to rebuild the Ukrainian army and to restart the war at a more convenient time. But Russia won’t budge until its war aims are met.

A hoped for countermeasure is to pressure Russia’s oil customers, to thereby decrease its income and prevent it from finishing the war in its favor.

When the war started in 2022 the European Union cut its own access to Russian oil and gas supplies. It started to buy more oil from Gulf countries and other producers. India and China were thus suddenly cut of from their traditional suppliers. They started to buy Russian oil. Then US President Joe Biden encouraged that. He did not want global gas prices to rise. Global supplies continued on an unchanged level and the change in the routes of oil around the globe had only a minor effect on prices.

One side-effect though was noticeable in some European refineries. Several of them were specialized in processing heavy Ural oil. They eventually had to go idle. Their business were picked up by Indian refineries which processed Russian oil and exported the resulting diesel fuel to Europe.

But now the US, and its European vassals, are trying to impose sanctions and/or tariffs on China and India for their continued buying of Russian oil. This would disturb the new market balance and eventually lead to higher oil prices for everyone.

China has successfully rejected US pressure. In response to tariff threads it withheld minerals the US needs. Trump had to pull back.

India is Trump’s new target:

Donald J. Trump @realDonaldTrump – Aug 04, 2025, 14:50 UTC

India is not only buying massive amounts of Russian Oil, they are then, for much of the Oil purchased, selling it on the Open Market for big profits. They don’t care how many people in Ukraine are being killed by the Russian War Machine. Because of this, I will be substantially raising the Tariff paid by India to the USA. Thank you for your attention to this matter!!!

India’s Ministry of External Affairs responded by pointing out the hypocrisy of demanding for it to end trade relations while continuing the U.S.’  own trade with Russia:

4. Europe-Russia trade includes not just energy, but also fertilizers, mining products, chemicals, iron and steel and machinery and transport equipment.

5. Where the United States is concerned, it continues to import from Russia uranium hexafluoride for its nuclear industry, palladium for its EV industry, fertilizers as well as chemicals.

6. In this background, the targeting of India is unjustified and unreasonable. Like any major economy, India will take all necessary measures to safeguard its national interests and economic security.

Seeing resistance Trump promptly upped his demands:

U.S. President Donald Trump said on Tuesday he would increase the tariff charged on imports from India from the current rate of 25% “very substantially” over the next 24 hours, in view of New Delhi’s continued purchases of Russian oil.

He also said a “zero tariff” offer for imports of U.S. goods into India was not good enough, alleging that India was “fuelling the war” in Ukraine.

The latest comment followed a similar threat on Monday, which prompted India’s Foreign Ministry to say the country was being unfairly singled out over its purchases of Russian oil.

India is a very large and proud country. It is likely willing to fight back. Over the last 25 years the US has tried to win the formally neutral India, which was friendly with Russia, as an ally. Trump is ruining this attempt.

There are Indian products, like pharmaceuticals, for which it has near monopolies and which the US needs. If it is smart it will play the same game as China did with rare earth: Withhold what the US needs and wait for Trump to capitulate.

To compensate for eventual damage it will, at the same time, have to seek better relations with China and even cheaper oil from Russia.

The European Union, meanwhile, continues to hurt itself. Last months it sanctioned an Indian refinery for buying Russian oil which promptly led to higher diesel prices in Europe:

The recent EU sanctions on India’s Niara Energy refinery have removed approximately fifteen percent of European diesel imports overnight, sending prices higher and creating significant market volatility.

With alternative supplies needed from the Middle East, Asia, and the US, diesel prices have jumped from $2.40 to $2.47 per gallon, and gas oil has climbed from $700 to $725 per metric ton. The shift comes amid already tight global supply, with Europe now required to pay a premium to attract new barrels.

It is also planning new sanctions on China even as China has proven to have escalation dominance in trade and is certain to hit back.

The attempt to fight Russia by secondary sanctions against its customers is likely to fail.

We can thus expect more attacks on Russia related shipping.

Reprinted with permission from Moon of Alabama.

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