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Reports have emerged that President Donald Trump will cancel his Budapest meeting with Russian President Vladimir Putin due to the Russian leader’s unwillingness to negotiate. This may appear to be a setback for the White House’s ambitions to broker an end to Russia’s war.
Yet despite the Kremlin’s unyielding posture, there are signs that Moscow’s war machine may soon begin to falter. Russia’s economy has resisted collapse largely thanks to Indian and Chinese crude oil purchases. But, facing domestic fuel shortages, Russia has become a net importer of usable fuel, observed Dr. Volodymyr Lugovskyy in a Hudson event with Dr. Anders Aslund and Senior Fellow Thomas J. Duesterberg. The Russian government is also struggling to fulfill its promised payments to soldiers and their families, and Moscow estimates its budget deficit has passed $70 billion—five times higher than its December 2024 estimate. “Its ability to wage the war effectively is eroding,” Lugovskyy said.
The United States’ recent sanctions on two Russian oil giants will help exacerbate these shortfalls. But the Trump administration can still do more to force Putin to come to the negotiating table. Duesterberg, Luke Coffey, and Can Kasapoğlu lay out 10 steps in a new policy memo. Their key insights are below.
Key Insights
1. Aggressively enforce secondary sanctions and close existing loopholes.
Announcing the sanctions on Lukoil and Rosneft was an important step. But real pressure will come from forcing foreign banks, insurers, and trading firms to choose between participation in Russia’s oil sector and participation in the US-led global financial system. The US should aggressively target banks that work with the sanctioned firms and make a public example of violators. And to close loopholes in the existing regime, Washington should:
- Rigorously enforce sanctions on Russian oil sales, including strict prohibitions on Russia’s shadow fleet.
- Sanction banks in China, India, Cyprus, and Hong Kong that facilitate Russian oil transactions.
- Collaborate with European allies to use Russian assets frozen in Belgium as collateral for loans to Ukraine.
- Sanction Russian banks and oligarchs, as well as foreign financial institutions that purchase Russian sovereign bonds.
- Leverage open-source intelligence to improve enforcement.
2. Promote a pro-America energy policy.
To protect Americans from CCP robot manufacturers’ malign business practices, Washington needs to ban the purchase and deployment of Chinese robots in the US. And to ensure US firms remain competitive, policymakers should protect energy generation that supports AI models by ensuring US infrastructure does not rely on Chinese parts, and ban PRC-based firms from establishing AI or robotics subsidiaries in the United States.
3. Expand mutually beneficial military cooperation.
Strengthening Ukraine’s indigenous defense industry and integrating it with US production, research and development, and supply chains would allow Washington to advance its own defense industry and help guarantee Ukraine’s long-term security. The US should double down on this collaboration. Washington should also remove restrictions on the use of US-made weapons and provide further support for Ukraine’s long-range strikes that are degrading Russia’s defense industrial base. Finally, the US and its North Atlantic Treaty Organization allies should expand the Prioritized Ukraine Requirements List (PURL), which has emerged as an effective burden-sharing mechanism.
Quotes may be edited for clarity and length.
Go Deeper
While the latest US sanctions target Russia’s energy sector, they have even broader implications for Moscow’s war. “New secondary sanctions on banks in China could also result in Putin losing access to needed technology such as semiconductors, machinery parts, and other war-related equipment,” writes Thomas Duesterberg in The Washington Post.
How Long Can Russia’s Weakening Economy Support Putin’s War on Ukraine?
To learn more about the weakness of Russia’s wartime economy, watch Thomas Duesterberg, Dr. Anders Aslund, and Dr. Volodymyr Lugovskyy discuss the historical, economic, and political context and what to expect in the coming years.
Watch the event, listen to the podcast, or read the transcript here.
