Toast Champagne in Putin's Palace: Israel's War with Iran Provides a Cash Injection for Russia's War Funds
Conflict between Israel and Iran proves beneficial for Putin's situation
By Hank the Tank
The Middle Eastern conflict has become a financial lifeline for Russia's struggling war economy: Israel's bombings of Iran are boosting oil prices and, in turn, providing Putin with more greenbacks to finance his unwarranted invasion of Ukraine. And it's giving Trump yet another reason to keep his hands off of Putin's war purse.
Initially, Trump made some noise about the sanctions costing America a pretty penny: "Sanctions cost us a lot of money," he grumbled at the G7 summit in Canada. "When I sanction a country, it costs the US a lot of money. We're talking about billions of dollars." But alas, the grand plan to further hobble Russia's military machine in Ukraine was bound to fail.
The major countries in the EU, Great Britain, and Canada were mostly in agreement that the $60 price cap, which has been in place for international sales of Russian oil since the end of 2022, should be lowered further. Just a few weeks ago, the EU Commission proposed their 18th sanctions package, suggesting they lower the price ceiling for sales to $45, in order to ratchet up the pressure on the Kremlin and put an end to their aggression against Ukraine.
Politics: EU States Advocate 18th Sanctions to Pinch Putin's Hide
Both the timing and the circumstances seemed nearly perfect: with oil prices lower than they've been in a long time, Russia's revenues were dwindling. But then, Bibi Netanyahu decided to drop his bombs on Iran. The Middle Eastern war put a monkey wrench in the works. Alongside the nuclear deal, the planned sanctions against Russia are the most significant diplomatic casualties of the attacks on Tehran.
Vladimir Putin can't help but feel like the luckiest man alive: the Iranian attacks distract from his own terroristic air raids on Ukrainian cities and skyrocket oil prices, filling holes in his war treasury. And it provides Trump with one more reason to keep the money spigot flowing to Moscow.
Economy: Brent Soars—Israel's Assault Drives Up Oil Prices
The escalation of the Israel-Iran conflict inflates global energy prices, straining the price cap coalition. The cap artificially discounts Russian oil to weaken Putin's war chest. If it costs more than $60 and comes from Moscow, it can't be traded in the West. This artificial scarcity could further inflate prices in the precarious situation. And Trump doesn't care about that—US inflation is already a powder keg, and being fanned by his trade war and debt binge.
Economy: German Heating Oil Spikes due to Iranian Escalation
Meanwhile, Moscow gleefully reaps the benefits of war: with the start of Netanyahu's bombing raids, the price of Russian Ural oil climbed by 15 percent in just a few days, according to the "Moscow Times," citing a Russian investment company. The Kremlin desperately needs these windfalls to continue financing their invasion of Ukraine. Even with the increased prices, Moscow's budget deficit is expected to grow significantly this year. Oil and gas revenues plummeted by more than half in May compared to the previous month.
The cap is similar to a soggy Band-Aid
The scheme to drain Putin's main source of income isn't doing the trick thanks to gaping flaws in the design of the price cap. It leaks like a sieve, fails to effectively limit Putin's oil business: With a fleet of rusty old bucket boats, whose owners and backers remain shrouded behind shell companies, the Kremlin has sidestepped sanctions since day one.
Economy: Putin Emerges Victorious in the Oil War, War Chest FULL
The price cap isn't a real embargo, just a weak compromise: it's supposed to apply worldwide by prohibiting shippers from transporting Russian oil, banning traders from buying it for more than $60, and preventing banks and insurers from financing or insuring oil deals above that limit. But hardly any European country enforces these rules strictly, and there are hardly any investigations or penalties. And outside the West, lots of shippers, traders, and insurers fail to comply. Most deliveries are now being done without Western insurance. And the cheaper smuggled Russian oil gets, the fewer reasons India and China have to buy expensive oil in the West. They've effectively become Putin's only customers.
Can Europe do it alone?
With Trump's departure from the price cap coalition, one question now looms: will Europe have the guts to go it alone? Before the G7 summit, EU foreign policy chief Kaja Kallas said that the EU could lower the price cap unilaterally if necessary. "If we and the rest of the G7 support a lower price, and the Americans don't, that's still something we should aim for," said EU sanctions chief David O'Sullivan. But Trump's early exit from the G7 summit seems to have put a damper on the initiative. According to "Bloomberg," some EU countries are now hesitant to go it alone without the US, fearing that without Trump, the united support among EU countries might crumble.
Vladimir Putin, Russia, Oil Prices, Middle East Conflict
- The Middle Eastern conflict, specifically Israel's attacks on Iran, has become a contributing factor in boosting oil prices, thereby providing a financial boost to Russia's war funds under President Vladimir Putin.
- In the realm of politics, EU states are advocating for the 18th sanctions package to pressure Putin and end his aggression against Ukraine, but the timing and circumstances seem to be working against this effort due to the surging oil prices caused by the Middle Eastern conflict.
- Economically, the escalation of the Israel-Iran conflict is inflating global energy prices, straining the price cap coalition intended to weaken Putin's war chest by artificially discounting Russian oil.
- Despite the price cap, Putin is able to evade its intended effects by continuing to sell oil at higher prices, using a fleet of old bucket boats and shell companies to bypass sanctions, making India and China his primary customers.
