Trump has now signed the sweeping Russia sanctions legislation championed by the late Senator Lindsey Graham. The bill passed the Senate 86-11 and the House 262-159, targeting Russian officials, banks, and the so-called shadow fleet transporting Russian energy. But the most dangerous provision is not actually directed at Russia. Washington has given the president authority to impose tariffs of up to 100% on the largest countries purchasing Russian oil and natural gas. In other words, we have moved from sanctioning Russia to threatening nations that refuse to obey American foreign policy.
This is economic warfare, plain and simple. Politicians have convinced themselves that they can manipulate the world economy as if every nation has no alternative but to obey Washington. They tried this when Russia was cut off from SWIFT. They froze Russian reserves and effectively announced to every government on Earth that foreign reserves are yours only so long as Washington approves of your foreign policy. Then everyone acts surprised when China, Russia, India, and others begin constructing alternative payment systems, increasing gold reserves, and reducing their dependence on Western financial infrastructure.
The real target here is increasingly India and China. India went from being a relatively minor purchaser of Russian crude before the Ukraine war to obtaining more than 40% of its oil from Russia. New Delhi has 1.4 billion people and has repeatedly made clear that its priority is affordable energy. Washington is now effectively telling India: buy energy where we tell you or risk losing access to the American market. Reuters reports that India has warned this could damage bilateral relations and disrupt global energy markets. Washington spent decades cultivating India as a strategic counterweight to China, and now Congress risks pushing India away because politicians cannot understand that sovereign nations act in their own economic interests.
China presents an even greater problem. Russian ESPO crude has surged above $120 per barrel amid disruptions in Middle Eastern supplies, with premiums over Brent reaching extraordinary levels. Chinese refiners have increased purchases precisely because they require reliable energy. If Washington attempts to remove Russian barrels from China and India while Middle Eastern supplies are already constrained, where exactly do these politicians believe the replacement oil will come from?
This is the stupidity of sanctions. Politicians look at a spreadsheet and assume that eliminating Russian exports means Russia receives less money. They never bother understanding markets. Reduce available global supply and the PRICE rises. Russian oil can therefore decline in volume while Russia receives more dollars per barrel. Reuters has already reported traders warning that restricting Russian supplies to China and India could drive global oil prices even higher and potentially increase Russian oil revenues. You cannot repeal supply and demand with legislation.
Then there are the secondary consequences. India either continues buying Russian oil and risks American tariffs, or purchases more expensive crude elsewhere and passes that cost through its economy. China will accelerate its efforts to circumvent Western financial systems. Countries conducting business with Russia will become increasingly reluctant to clear transactions through institutions exposed to American sanctions. Every sanction therefore provides another incentive to construct an alternative to the dollar-based financial system.
This is precisely what I have written about regarding the weaponization of SWIFT. The dollar became the world’s reserve currency because people trusted the American financial system. Reserve currency status is not something Congress can legislate. It is based upon confidence. When politicians weaponize that system against anyone they dislike, they undermine the very confidence that made the dollar dominant in the first place. That does NOT mean the yuan suddenly replaces the dollar tomorrow. China has capital controls and lacks the deep open capital markets required of a true reserve currency. But Washington is nevertheless encouraging the rest of the world to develop alternatives.
The most disturbing aspect is that sanctions have replaced diplomacy. Graham believed squeezing Putin economically would force Russia to reconsider the war. That is the theory behind virtually every sanctions regime. Yet sanctions have a terrible historical record of forcing major powers to surrender their core geopolitical objectives. More often, they encourage self-sufficiency, alternative alliances, black markets, and new trading blocs. Russia redirected energy toward Asia. China learned that dependence upon Western technology and finance represents a strategic vulnerability. Europe discovered that cutting itself off from cheap Russian energy carried an enormous economic cost of its own.
Trump has always viewed tariffs as leverage, and this legislation preserves considerable presidential flexibility. That distinction matters. A tariff authority does not mean every threatened 100% tariff will actually be imposed. Trump may use that authority as a negotiating weapon with India and China rather than immediately triggering an economic confrontation with both. But Congress has nevertheless created the weapon, and markets must now price the possibility that it will be used.
This is how wars expand beyond the battlefield. First there are military sanctions. Then financial sanctions. Then secondary sanctions against neutral countries. Then tariffs against countries trading with the enemy. Eventually the entire global economy begins dividing into competing blocs.
That is exactly what happened before previous major international conflicts. Capital begins retreating behind geopolitical lines long before politicians admit what is taking place.
The neocons continue to believe that economic pressure will bring Russia to its knees. They never consider what happens when their policies instead fragment the world economy, push Russia and China closer together, alienate India, increase energy prices, and undermine confidence in Western financial institutions.