Trump may boost energy sanctions on Russia, in addition to Iran, in second term

Donald Trump is expected to wield oil sanctions fiercely against Iran in his second term in the White House, but some experts say he could also put stronger energy sanctions on the Kremlin if Russia does not agree to a Trump deal to end the conflict in Ukraine.

"What I am hearing from Trump advisors is that Trump would be prepared to put much tougher sanctions against them," if Russia rejects a peace deal, said Ian Bremmer, president of political risk consultancy Eurasia Group, said during a Nov. 6 webinar.

Tougher sanctions could target Russia's central bank or the country's remaining energy exports, including to countries like India and China, said Bremmer.

In his first administration, Trump was chummy with Russian President Vladimir Putin in bilateral meetings, but actual Trump policy towards Russia was notably more hawkish than the Obama administration had been, Bremmer said.

For example, Trump provided the Ukrainians with anti-tank missiles and the Obama administration had refused to give them those weapons, Bremmer said.

Fernando Ferreira, director of geopolitical risk service at Rapidan Energy Group, also said that Trump could use economic leverage to force Moscow to accept a compromise to end the conflict.

"We don't know the format of this 'economic leverage,'" Ferreira said. Some have suggested increasing US oil production to force prices lower, "but tighter sanctions on Russian oil exports are probably not off the table," he said.

But some sanctions on Russia could be relaxed.

For instance, Trump might ease the G7-led $60/b price cap on Russian crude, Rachel Ziemba, a senior advisor at consultancy Horizon Engage, said in a Nov. 6 note. "The price cap is seen to benefit Russia and China and has created a network of intermediaries that skirt G7 financial services and regulation," she said.

Iran sanctions

On Iran, experts generally agree that Trump is likely to target Tehran with tight sanctions.

"I think Iran's in some trouble," Jon Lieber, head of research and managing director for the US at the Eurasia Group, said. "I think that you're going to see a full pivot back towards a maximum pressure situation with Iran," he said during the webinar.

Trump is likely to have very little openness to diplomatic engagement with the Iranians and possibly be open to further engagement with Israelis to take advantage of the moment in Middle East right now, "which could be even more destabilizing to Iranian oil output," Lieber said.

Iran produced 3.23 million b/d of crude in September, according to the latest Platts OPEC+ survey from S&P Global Commodity Insights.

Sanctions during Trump's first term pushed Iranian crude output as low as 2 million b/d.

But Iran has since developed illicit financial networks to sell crude, so cutting exports would require blunter restrictions on the buyers and intermediaries involved in the trade, Ziemba said.

Such restrictions could target Chinese banks and refineries, as well as Malaysian and Emirati intermediaries involved in the trade, Ziemba said. Compared to the Biden administration, Trump might be less worried about the oil price spikes and China risks that would go along with blunter sanctions, she said.

Sanctions on Venezuela remain in limbo for some time, Ziemba said. "On Venezuela, the path is less clear, but a return to maximum pressure seems unlikely," she said.

Overall, Trump's approach to sanctions is likely to depend on the nature of the oil market when he takes office, said David Goldwyn, president of Goldwyn Global Strategies and chair of the Atlantic Council Global Energy Center's Energy Advisory Group. "The softer the market, the higher the likelihood of tighter sanctions," he said.