After recent failures to bring the Kremlin to the negotiating table to end the war in Ukraine, Trump has adopted a new approach to Putin, taking the significant step of sanctioning Russia’s two biggest oil producers, Rosneft and Lukoil, while also demanding that China and India stop buying Russian oil. Will this step finally persuade Putin to negotiate an end to his war? Why has it taken the United States so long to go after the two biggest cash cows in Putin’s war chest? Will these sanctions have any side effects for global markets?
The transcript was automatically generated and not edited prior to publication.
Alexander Gabuev. Welcome to the Carnegie Politika podcast. I'm Alexander Gabuev, director of the Carnegie Russia-Eurasia Center in Berlin. Today's episode is dedicated to the oil sanctions that Donald Trump has introduced against Russia's two largest crude producers, Rosneft and Lukoil. My guest is Edward Fishman, a senior research scholar at the Center on Global Energy Policy at Columbia University, and author of Chokepoints: American Power in the Age of Economic Warfare, a New York Times bestseller and one of the most comprehensive accounts of sanctions policy and the way that both the United States of America, its allies and adversaries are using sanctions as a tool for achieving their geo-economic and geopolitical aims. Donald Trump has been very reluctant in introducing any sanctions against Russia. So when, on October 22nd, he announced that the two largest oil producers, Rosneft, a state-owned company, and Lukoil, a private company, will be put on the Treasury's SDN list, that was seen as a big sign of his shifting attitude towards Vladimir Putin and definitely a big encouragement for the Ukrainian side. But is that move really being able to force Vladimir Putin to the negotiation table? I'm happy to discuss that with Eddie Fishman, who's been in the sanctions machinery inside the State Department for many years and has written one of the most comprehensive and fascinating accounts of how that machinery works. Welcome, Eddie. It's great to have you.
Edward Fishman. Sasha, thank you so much for having me on the show.
Gabuev. Well, Donald Trump is really unique in the line of American post-Cold War presidents. You document that all of the presidents, starting from Bill Clinton and even before him, used sanctions as their preferred tool for geopolitical and geo-economic coercion. Why do you think that Trump is different? Because his favorite tool seems to be tariffs, not sanctions.
Fishman. I think that's right. And, you know, in some ways, Trump is part of a broader trend that has played out in the United States over the last 25 years. If you look at every single U.S. president in the 21st century, from George W. Bush to Barack Obama, to Trump's first term, to the Biden administration, you actually see that each president has imposed sanctions at twice the rate of their predecessor. So there has been a structural increase in the use of sanctions that Trump is sort of just another name in a list of many presidents. I do think, though, that particularly in his second term, one of the big differences so far is that he's been trying to use tariffs as a tool of geoeconomic coercion instead of sanctions. And I think the track record is very poor so far. If you look at, for instance, Trump's attempt to use secondary tariffs on India, where in August, he ramped up tariffs on India to 50%, which is actually the highest rate faced by any major economy in the world, to try to coerce the Indians to stop buying Russian oil. The data speaks for itself. In September and October, so in the two months since those secondary tariffs went into effect, Indian refiners actually purchased more Russian oil than they had in the preceding months. And that is no surprise to me, because if you look at how tariffs work, first of all, the chokepoint, if you will, that they seek to weaponize is the U.S. consumer market. It's America as a destination for other countries' exports. And the U.S. is the biggest importer in the world, but we only account for about 13% of global imports. So it's actually not that significant. I mean, if you compare that to 25% of global GDP that the U.S. accounts for, we're actually relatively small as an importer compared to our overall economic weight. When you look at financial sanctions, by contrast, the U.S. dollar is used in 90% of all foreign exchange transactions. So the weight of America's financial might greatly exceeds our significance as as a trading power. And so it didn't surprise me at all, honestly, that Trump's secondary tariffs didn't work particularly well against India. The other thing I'd mention is that tariffs tend to have a a broad impact. So they're really focused on the entire Indian economy, hurting everyone from shrimp farmers to garment manufacturers, as opposed to the actual refiners who are making the decisions to buy Russian oil. Whereas if you look at secondary sanctions, which I've been an advocate for, you can target those much more specifically on the specific companies involved in the Russian oil trade. And so it didn't surprise me as well that last week when the Trump administration imposed sanctions on Rosneft and Lukoil, and which included an explicit threat of secondary sanctions on any bank or refinery or trading company that deals with Rosneft and Lukoil, you've immediately seen a pullback from Indian refiners. Reliance, the major Indian refiner that's actually the Indian refiner that buys the most Russian oil, has already come out and said that they're recalibrating their their oil purchase decisions from Russia. So I think that it's very important to distinguish between tariffs and sanctions. And certainly if your goal is economic coercion and you're the United States, financial sanctions are always going to be more impactful than import tariffs.
Gabuev. And that's how you explain why President Trump has ultimately decided that he will go with sanctions rather than tariffs against Russia.
Fishman. I think that's right. I mean, again, the data speaks for itself. The secondary tariffs on India haven't been working. It's very plain for anyone to see. And I'd also say that there's there's been a a threat of secondary tariffs on buyers of Venezuelan and Iranian oil as well. And those haven't been working particularly well either. So I do think that the decision last week to impose sanctions on Rosneft and Lukoil was partly motivated by a reading of the situation that the secondary tariff strategy was not working. But I also think it was motivated by the fact that Trump has not seen any significant moves by Putin at the negotiating table. I think when Trump came in, he really believed that Putin wanted a peace deal and that Zelensky was the obstacle to making peace in the Russia-Ukraine war. And that's why he didn't impose any sanctions on Russia from January 20th until last week. I think it's important to stress just how unusual that is, because from February of 2022 until Trump's inauguration, so the first three years of the war, the United States imposed a new package of sanctions roughly every single week, with well over 5,000 companies and individuals sanctioned in that three-year period. So for Trump to go from one package of sanctions every week to zero in nine months, I think speaks for itself that Trump really didn't think that he needed any more pressure on Russia in order to get Putin to make peace. But I think, look, after nine months of trying, if you keep trying, you got to start asking yourself if there's maybe a problem with your own analysis. I think that in some in some sense, voices in the Trump administration internally who've been pushing for more pressure on Russia prevailed this time. And I think that's what created the opportunity to impose those sanctions on Rosneft and Lukoil.
Gabuev. Before we continue, I encourage all of our listeners to hit the subscribe button if you are not already subscribed to this podcast and leave us your feedback. We are very curious to hear what you think about the issues under discussion. So, okay, nine months without sanctions, obviously not bringing Vladimir Putin to the negotiation table, that's clear. But how efficient do you expect these sanctions to be in really affecting the Kremlin's war economy and ultimately pushing Vladimir Putin into negotiations? Because there are many skeptics who say that the U.S. has been trying all kinds of sanctions against Vladimir Putin's regime over the last three plus years. As you mentioned, like a sanctions package every week coupled with European sanctions. And even more sanctions if we count all the restrictive measures introduced since Crimea's annexation and downing of MH17 in 2014. And yet Vladimir Putin still has means to fight. So how can be the efficiency of the sanctions policy be measured?
Fishman. I think you have to separate economic impact and then policy objective, because in some sense, they're not always exactly the same. So when it comes to the economic impact of these latest sanctions on Rosneft and Lukoil, I think a lot will depend on whether this is a one-off or if this is actually the beginning of a new strategy to try to squeeze Russia's oil revenues. As your listeners know well, because you've covered the Russian oil sector in previous podcasts, Russia's economy is highly dependent on exporting oil to the global marketplace still to this day. It's really the only globally competitive sector of the Russian economy. And so if you're able to to dramatically squeeze Russia's oil revenues, it's going to have massive impacts across Russia's economy, not just in terms of war production, but also in terms of inflation, in terms of unemployment, the types of things that could affect everyday Russians who so far have been you know supporting the war, although you can correct me if I'm wrong on that. I think that the question of whether this actually will squeeze Russia's oil revenues is: is the Trump administration going to actually take these sanctions and enforce them aggressively over the next six to 12 to 24 months? If you look at the most successful secondary oil sanctions that the U.S. has ever done, and I cover this in quite a bit of detail in my book, Chokepoints, it was against Iran in the lead-up to the nuclear deal in 2015. And it was actually rolled out in a similar way where the national Iranian oil company, the big oil companies of Russia, the big oil firms of Iran, the shipping firms in Iran were all sanctioned by the United States. And then the U.S. attempted to use secondary sanctions to gradually reduce Iran's oil sales. The calculation at the time was that because Iran was selling two and a half million barrels of crude oil every single day on global markets, you couldn't bring that from two and a half million barrels to zero overnight. And so from 2012 to 2014, the Obama administration went around the world to try to threaten secondary sanctions on banks in China and Dubai and oil importers and refineries in places like India and Turkey, really the same players that are involved in the Russian oil trade today. And it largely worked. Iran's oil sales went from two and a half million barrels a day to about one million barrels a day. So a 60% decrease in about 18 months. So I think if you take that success and look at Russia today, I mean, Russia is selling five million barrels of crude oil on the global market every single day. So twice as much as Iran was selling. And then another two and a half million barrels of refined petroleum products. So it's a much harder task. But I think what that also tells you is that there's no way you're going to get Russia to go from 5 million barrels of crude oil to zero overnight. Your best bet is to try a strategy like we tried against Iran, which is over time to gradually persuade and coax the importers of Russian oil to reduce, which then gives the marketplace the time to balance. It sends a signal to oil producers in places like Saudi Arabia and the United States that they should pump more oil to take advantage of demand that's going to be on the marketplace. So I do think that is a possible strategy. It's something that Trump could execute. You're already seeing significant risk aversion in the refineries in India and China. The question is, though, is Trump actually going to prioritize that? When he talks to Xi Jinping, when he talks to Modi, what level of a priority is forcing them to reduce their purchases of Russian oil? If you're asking me to look into a crystal ball, I remain skeptical that that 's going to be a very high priority for Trump. So I worry that we may look back at this six months from now as a one-off where Trump was piqued with Putin, imposed sanctions on some big Russian oil companies, but then you didn't see this as the beginning of a whole new strategy for the United States. I hope I'm wrong, but I fear that that is probably the likeliest scenario.
Gabuev. The question that many people in Ukraine and in the West who support Ukraine are asking is: why only now? Why are the two largest cash cows of the Russian budget, Rosneft and Lukoil, sanctioned only now? Throughout the sanctions campaign, we've seen this gradualism that this stronghold is attacked bits by bits by bits by bits. And people say, well, had the sanctions been introduced back in 2022, Putin would be long on his knees begging for peace. How do you explain this gradualism of the sanctions packages and what are the factors that policymakers are taking into account when taking those decisions? You are speaking from experience as somebody who's been in the rooms where these decisions have been made.
Fishman. I think if you go back to late 2021 and early 2022, when the Biden administration was building its sanctions plan for a potential Russian invasion of Ukraine, they really set out to accomplish something that was very difficult, which was imposing maximum pressure on Russia without really affecting the main export sector of Russia's economy, which is the oil sector. And the reason was that while Joe Biden himself, I think, is probably the most hawkish U.S. president on Russia we've had since Ronald Reagan - he's very hawkish on Russia. As you know, even back in 2014, he favored arming the Ukrainians when President Obama decided not to do that - he was not willing to impose aggressive sanction on Russian oil sales because he was worried about spiking oil prices and worsening inflation at home. It was ultimately a domestic political calculus that the U.S. economy could potentially have significantly higher oil prices and significantly higher inflation, which was already at a multi-decade high. If you go back to 2022, we had 7% inflation here in the U.S.. And for a period of time, global oil prices were above $100 a barrel. Biden was just not willing to take that domestic risk. I also think that U.S. domestic politics played a role in that there were real concerns that if Biden, were his popularity to plummet because of oil prices and inflation, that you might see a resurgence of support for MAGA and maybe the return of Trump. So I think that political polarization in the United States in some ways constrained the policy flexibility that Biden felt he had. Of course, ironically, they succeeded in bringing inflation down eventually and didn't sanction Russian oil sales. And Trump was elected anyway. So you could ask whether that was the right decision. By the time we get to 2024, you know, oil prices have come significantly down. They're in the 60s. You've got inflation that is now under control. And I think that the reason Biden didn't aggressively ramp up sanctions in 2024 was probably because he was worried again about doing anything that might upset the apple cart for the election in November. But you go after the election and Biden actually did start ramping up sanctions on Russian oil. And in some ways, the policy that Trump rolled out last week is a continuation of the sanctions that Biden did in January, right on his way out of the Oval Office, where he imposed blocking sanctions on Gazpromneft and Surgutneftegaz, who are the third and fourth largest oil companies in Russia. So this really is a story about the Biden administration feeling hemmed in by domestic politics. My own view is that the gradualism was not well founded, that if you go back to 2022, had Biden rolled out sanctions like Trump did last week and actually inaugurated a policy similar to the Iran secondary oil sanctions that I described a few minutes ago, you would have actually been able to significantly squeeze squeeze Russia's oil revenues without causing a massive spike in oil prices, and certainly not one that would have impacted electoral outcomes. So I do think that history will not look kindly upon the cautious attitude of the Biden administration.
Gabuev. Well, we know that in hindsight, but I think that all of us need to exercise a lot of humility because it's very difficult to know in advance what particular policies, what kind of outcomes they will bring. But I think that looking looking backwards, I can totally agree with you, although I know that a lot of Europeans, at least, with whom we've been talking, we're saying, oh, wait a minute, this has never been really wargamed, and we have never done proper calculus, and how could how can we.
Fishman. Yeah. On that point though, Sasha, if I can, just for one one quick follow-up... Look, Chokepoints, my book, it really tells the story of U.S. economic warfare across the 21st century. So Iran, Russia, China. And one consistent theme is that when the U.S. does weigh oil sanctions, we consistently overestimate the impact on price. There was fear of doing these secondary sanctions against Iran in 2012 that I mentioned earlier, because there was concern that that might spike prices above $200 a barrel. And I think that's because if you think about it, the economists in the U.S. government doing these forecasts...there's a lot of downsides to being wrong. If they come out and say, "this is not going to impact oil prices," and then there's just a giant spike that leads to a collapse in political support for the president, they're in a lot of trouble. So there's a lot of risk aversion in these assessments, and they're often wrong. So while I support wargaming - it's something I've pushed for for a long time - I think that you've got to look at the motivations also of the individuals. And then the second point on the Europeans, because I really want to set the record straight here. There's this unusual narrative in the United States that the Europeans have been the obstacle to stronger sanctions on Russia. That was definitely the case when I was working on Russia sanctions in 2014 and 2015 and 2016, where the Europeans were very wary of doing aggressive sanctions on Russia. But in the post-2022 period, Europeans have consistently been out in front of where the U.S. is on Russia sanctions. And I think on oil sanctions, I think we actually could have had a unified G7 policy to cut Russia's oil sales, a much more aggressive one than the price cap that we ultimately did in 2022, had the United States been in favor of it.
Gabuev. So, sanctions are as efficient as bureaucratic enforcement. You describe that in your book and have documented its evolution. How do you see the strength of the U.S. enforcement mechanism right now, given everything that happened with DOGE and Elon Musk and firing a lot of professionals, like, a lot of people at the State Department sanctions bureau have been let go, what happened to OFAC and other parts of the U.S. state machinery that is in charge of enforcement. And by the way, will the government shutdown also have an impact on that?
Fishman. Yeah, this is a great question because, and this also dovetails off what I was saying about Europe before. While it's great that the Europeans are out in front of the U.S. on sanctions - for instance, the Europeans since this summer have been imposing secondary sanctions on Indian oil refineries and Chinese banks; that's something the U.S. has not yet done - while I applaud the Europeans, I applaud the British for doing this, the problem is they don't have the same track record of sanctions enforcement as the United States. And so banks and companies do not treat EU sanctions and UK sanctions the same as U.S. sanctions. The reason U.S. sanctions are so powerful is that the banks who have violated U.S. sanctions throughout the 2000s and 2010s oftentimes found so found themselves being fined billions and billions of dollars and having really intrusive monitoring monitoring regimes imposed upon them by the U.S. government. For instance, BNP Paribab was fined $9 billion dollars in 2014 for violating a range of U.S. sanctions. And so it's really that fear of enforcement that is why banks, even in places like China, are worried about violating U.S. sanctions. When it comes to U.S. enforcement right now, it's not so much OFAC that I'm worried about. If you look at Treasury, the sanctions folks at Treasury have largely been spared from the big government cuts. I think there's a sense that economic warfare is a really important part of what the United States does. And so they haven't suffered nearly as much as other parts of the U.S. government. The thing that's more concerning is actually the rule of law, because when you look at the biggest sanctions enforcement cases, it's really the Department of Justice that is leading that. It's not Treasury. It's not the State Department. The BNP Paribab fine or HSBC, it's DOJ that has made these big settlements with these foreign banks. And I worry that the Department of Justice has actually been hollowed out quite a bit. You've seen a lot of the best and most experienced attorneys leave. And then you've had a shift in prioritization where there's all these different sort of pet issues of the president that are getting focused by the prosecutors at DOJ as opposed to sanctions. The other thing that's concerning that's really flown under the radar: the actual biggest sanctions fine of the last several years was against Binance, the crypto company. It was fined something like $4 billion dollars in 2023 for violating a whole range of different sanctions. And their CEO was actually prosecuted himself and convicted and put in prison. I saw last week that Trump actually pardoned the former CEO of Binance. And so I also worry that that does send the wrong message that if you violate U.S. sanctions, you might actually have a Get Out of Jail Free Card if you're able to have a close relationship to the Trump administration.
Gabuev. Are the Europeans able bureaucratically to step in and fill the void left by this wobbleness of the U.S. sanctions machinery and what needs to happen for them to be properly equipped with the bureaucratic ammunition to do the heavy lifting?
Fishman. On the policy side, the EU has made big strides where they really do, I mean, they churn out these sanctions packages with an impressive frequency. You look at the 18th and 19th packages and in July and October. I mean, that's only a few months apart, and they're both very robust. And again, they include targets that the U.S. has not been willing to touch, like banks and companies in China and India. So the EU has done a great job on on the policy side. It's really the enforcement side that the EU lags on. And that's because while the policy ultimately is set at the EU level, the enforcement is done at the member state level. So it is a prosecutor in Greece that is the one who's going to be contending whether a Greek bank is violating sanctions, or a Hungarian regulator or a German regulator. If that is the way that the EU is going to go about sanctions enforcement, they're never going to catch up to the United States. So I think you're going to need a shift in terms of how the EU views sanctions enforcement. That's more in line, by the way, with the way the EU does competition policy. The thing that's ironic here is you look at some of the research, for instance, by my colleague at Columbia, Anu Bradford, on the Brussels effect. On some areas of regulation, like competition policy, the EU has huge, enormous clout because they actually do the enforcement at the EU-wide level, and there are even U.S. companies who you know have been and been fined. The same is true with data privacy. Look at GDPR. It's created a global standard because the EU enforces it at a a centralized level. They don't do that for sanctions. I think if they did that for sanctions, all of a sudden you would have Brussels not as the equal of Washington, but but a serious peer when it comes to economic statecraft and economic warfare.
Gabuev. All right, sanctions wars are also a competition between swords, which are the sanctions, and shields, the counter sanctions, or the measures to really adapt to the effect of the sanctions. So let's talk about adversarial adaptation, which is also a focus of your book. In Team West, the best and the brightest people are working on sanctions. And then in adversarial regimes like Russia, China, Iran, the best and the brightest are doing counter sanctions. Can you talk about the trends you see in Russia's adaptation to sanctions since 2014? What tools can the Kremlin deploy now in order to react to Trump's most recent moves?
Fishman. And you, Sasha, have done some great work on this, too. So if you have any thoughts, feel free to chime in. and I relied on some of your research when I was writing Chokepoints. There's a number of things that Russia did after 2014. They domesticated a lot of their payment processing, which I think is in some ways one of the biggest successes that Russia has had. In 2022, when Visa and MasterCard both exited Russia, domestic payments for credit cards still worked in Russia because they forced basically even Visa and MasterCard to process their payments through NSPK, this domestic payment system. So in some ways that worked extremely well. Another big part of what they've done is this pivot to Asia. They've been selling more and more natural gas to China, for instance, through the power of Siberia pipeline. They now have this MOU for power of Siberia too. We'll see if that ever gets built. And then their oil sales post 2022 where, primarily they used to go to Europe, have started going largely to India and China. I think when you look at the most recent sanctions, which are really targeted at Russia's oil sales in particular, the real question is what happens to India. Because historically speaking, Indian refiners have been more risk-averse than Chinese refiners. The best example of that is if you look at Iran, which is under similar secondary sanctions, all of Iran's oil sales, basically 2 million barrels a day, go to China. The Indians have not been willing to touch any of it because they've been afraid of U.S. secondary sanctions. So if we see a similar phenomenon like that play out in the next few months, where Reliance and other big Indian refiners start cutting back on their purchases of Russian oil, and that's a lot - I mean, the Indians are buying between 1.5 million and 2 million barrels of oil per day from Russia - so if they were to decrease their purchases by a million barrels a day, where's that oil going to go? The most obvious answer is China. But China is already getting something like 20% of its oil that it imports every single day from Russia. Does China actually have the ability and desire to absorb another million barrels from Russia, because all of a sudden you almost get a monopsonistic situation where China is totally dependent on buying oil from from Russia, which is something they might not want to do from an energy security standpoint. So I think really the biggest question now in terms of adaptability is: can the Russians persuade the Chinese to take more take on more barrels? Those barrels, by the way, are going to be selling at a much steeper discount because just from the laws of supply and demand, you have fewer buyers in the marketplace for Russian oil. The price is going to go down. So there are going to be refiners in China who are tempted to buy it. They may say, "OK, we'll take this, but we need it to you know go through some you know convoluted supply chain where actually it's Malaysian oil that we're importing, but it's coming from Russia," which is what they do with Iran. And then, of course, there's the question of, going back to what we said earlier, how much is Trump going to enforce? Because over time, if the market just determines that Trump is actually not going to enforce these secondary sanctions, maybe even other countries are willing to snap up this Russian oil at a steep discount. The comparison I'd give here is Arctic LNG-2. The U.S. imposed sanctions on this LNG project in Russia, Arctic LNG-2, in late 2023. For almost two years afterwards, no one was willing to buy any cargo of LNG from Arctic LNG-2 because they were so they were so worried about secondary sanctions. Well, a few months ago, finally, a Chinese company took the first shipment of LNG from Arctic LNG-2. They sort of waited and everyone said, "well, is the U.S. going to do anything?" The U.S. didn't ultimately impose any sanctions. And now I think they've taken more than 10 cargos in the last few months from Arctic LNG-2. So I think the Chinese have determined that they don't actually have to worry about secondary sanctions when it comes to Russian LNG. I think if the market in a few months' time decides that's also the case with Russian crude oil, all of a sudden you might see other buyers in the market beyond China also pop up to take advantage of these discounted barrels from Russia.
Gabuev. Part of the adaptation is that the sanctions environment creates a lot of vested interests, both in the countries that are sanctioned, like Russia. There are a lot of people well-plugged into the Kremlin power holes that are making a lot of money by providing these channels for sanctions evasion, marketing Russian crude, and so on. These people are really not interested in the sanctions reality going away. And all the time they tell Mr. President that, you know, there is a way to finance the war and that it's all the time making us stronger, more sovereign, less dependent on the American financial system and more immune to this pressure, which makes us really kind of a unique great power. And that "all the time" is music to the ears of somebody who has made making Russia sovereign and independent from Western dominance or coercion really the major threadline of his presidency recently. It also creates a lot of vested interest in the countries like China and India, which are also happy to make this trade with Russian sanctioned entities because the profit margins are just so much higher than in normal businesses. And particularly when the U.S. goes out and sanctions those groups, they have nothing to lose, right? Two new refineries have been sanctioned by the European Union. These are teapot refineries, so they are small. They cannot take all the volumes that Russians want them to take. But what's their business now? They definitely do only Russian oil. It's only the RMB and ruble, and the profit margins are really huge for them. So the question is whether the U.S. or Team West has the toolkit to really go after all of their buyers inside China and instill fear in them. I think that you see this chain effect like what happened in the Russian economy. Between 2014 and 2022, a lot of Russian entities were afraid to touch stuff that was sanctioned. For example, no Russian major bank had a branch in Crimea because you get immediately on the SDN list because of that. But when sanctions became routine for the Russian economy, I think more and more entities were encouraged to do sanctioned stuff. And then the question is how much the trades with Russians will be connected to a broader dossier of geopolitical competition between the U.S. and China and how much to your earlier question whether Trump raises sanctions trade with Russia as one of the key items that he's negotiating with Xi Jinping. The U.S. and China have a lot to sort out when it comes to critical minerals, access to U.S. technology on semiconductors, AI models, and so on. We can talk about this for a long time, but [my] last question to you. You describe in your book a very interesting fact that globalization was built on the belief that economy of scale, when supply chains get globalized, really benefits everybody because you can really scale up your production, diversify, put some production lines where the labor is really cheap and logistics is good. That has been weaponized, first by the U.S., because everybody relied on the U.S. financial system and U.S. tech, but then increasingly weaponized by its adversaries, China first and foremost. And that leads to fragmentation of this globalized economy. Do you think that sanctions aimed at removing the Russian oil and gas market contribute to that effect, that they make the global energy flows and energy markets more fragmented?
Fishman. Definitely. And I think the oil market in some ways is one of the more surprising and salient examples of geoeconomic fragmentation. Because if you look at the globalization period, the oil market was in some ways the poster child for globalization, right? It's a barrel of oil no matter where it came from. You basically knew what the price was. It was all one giant big global market where you put this oil on tankers and you could send it as far away as you want to get the best price. It didn't matter where it was coming from. Already, we see now that somewhere between 15 and 20% of global oil supplies is under some form of U.S. sanctions plus the threat of secondary sanctions. That's Russia, Iran, and Venezuela. And so if you've got nearly one in every five barrels of oil around the world that the West isn't willing to touch - Europeans won't buy it, the U.S. won't buy it, Japan won't buy it, really anyone who's worried about potentially running afoul of U.S. sanctions won't buy it - you are starting to create a bifurcated market where there are barrels that only certain countries are willing to buy. From the U.S. perspective, there's there's some real downsides here, because what it does, in some sense, is it ossifies the relationships between our geopolitical rivals and, in some sense, some of the swing states who are willing to kind of stand on the fence for U.S. sanctions, for instance, India and Turkey, who have been willing to buy Russian oil. It's concerning because it has made Russian oil more attractive to these players and has given them more of a reason to continue an economic relationship with Russia. So I think that when we do these oil sanctions, there are some real downsides. Then, of course, when you expand it beyond the oil itself to the supply chain, the shipping companies...you've covered in previous episodes the rise of shadow fleet. When you have an entirely different tanker fleet and different insurance markets that are covering sanctioned barrels that may not be as reliable, that may have environmental concerns, safety concerns, that becomes a problem too. So I do think that in some ways, it is most remarkable that even the oil market, this poster child of globalization, has started to fracture. It's a sign of how significant economic warfare has become and how big of a factor it is, not just in terms of geopolitical competition, but in terms of the global economy itself.
Gabuev. Well, we've discussed that we are all very smart in hindsight, but it's sometimes very difficult to judge the outcomes of certain policies before a certain [amount of] time passes, and we clearly see the impact. So, we need to have you back in some time to see what happened with Trump's oil sanctions, whether there was follow-through or they were one-off, as you feared. Thank you so much for joining.
Fishman. Yeah, Sasha, this was a great conversation. I appreciate you having me on.
Gabuev. And we remind everybody that in order to not miss an episode, we will encourage you to hit the subscribe button and also leave us some feedback. We are very interested to hear what you think. And with that, this is the end of the episode. We'll see each other in two weeks. Bye.
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