This is an audio transcript of the FT News Briefing podcast episode: ‘Trump’s Russian oil sanctions shake energy markets’
Marc Filippino
Good morning from the Financial Times. Today is Friday, October 24th, and this is your FT News Briefing. Sanctions on Russian oil groups have thrown a wrench into the oil market. And the US pardoned another crypto executive yesterday. Plus, Argentina heads to the polls for midterm elections this weekend. It’s a make-or-break moment for President Javier Milei.
Ciara Nugent
If Milei loses the midterms, Trump could pull the plug on that loan, which would be pretty disastrous at this point for the peso.
Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.
[MUSIC PLAYING]
US President Donald Trump this week imposed what he described as massive sanctions on Russian oil giants, Rosneft and Lukoil, and their subsidiaries.
Karoline Leavitt voice clip
Look, the president has always maintained that he would implement sanctions on Russia when he felt it was appropriate, and necessary and yesterday was that day.
Marc Filippino
That’s White House press secretary Karoline Leavitt. Trump wants to strong-arm Russian President Vladimir Putin to the negotiating table to end the war in Ukraine. Oil prices surged higher in response to the sanctions, and the move could have huge implications for the energy market. The FT’s US energy editor, Jamie Smyth, has been following all this. Hi, Jamie.
Jamie Smyth
Hi, Marc.
Marc Filippino
So why did Trump decide now is the time to take such a substantial step, especially given that his predecessor, Joe Biden, decided to avoid it altogether?
Jamie Smyth
Yeah, I think that’s a very interesting point. What we see now is a completely different oil market than we had during President Biden’s term. So, right now we’ve got an oversupply global oil market. The price of crude has really tumbled, and this has given Trump the ability to intervene in this way and impose sanctions without, you know, the fear that it’s gonna be politically damaging by pushing up domestic petrol prices here in the US. Because when you do impose sanctions like this, it shocks the market, and as you’ve seen, the oil prices spiked up 6 per cent since the sanctions were announced.
Marc Filippino
Yeah. I wanna get into that oil price jumping a little bit, but first, after the White House announced the sanctions, India’s and China’s largest refinery said they might actually stop buying Russian oil. They’re worried about secondary sanctions. How big of a deal would that be?
Jamie Smyth
It would be really significant. Russia exports about 5mn barrels of crude per day. You know, it’s a huge amount, and China and India take up more than half of that, so this would leave a lot of Russian barrels struggling to find anyone else able to take them. What we’ve seen in the past is that when sanctions have been introduced, there’ve been nifty ways that the Russians have been able to circumvent them. A big difference would be if the US goes ahead and imposes what’s called secondary sanctions against companies who buy Russian oil or the financial intermediaries that facilitate this. This would mean that any of these companies or banks would risk exclusion from US capital markets. Now that’s a really big deal, and I think if Trump went this far, then it would be a much higher likelihood that you would actually see Russian oil finding it difficult to find buyers.
Marc Filippino
Interesting. I wanna go back to what you had mentioned earlier about that 6 per cent spike in global oil prices on the back of Trump’s decision to impose sanctions. What does that mean for the oil industry and its outlook?
Jamie Smyth
Well, as I mentioned before, there has been this really steep drop in oil prices over the course of the year, so the profits that some of the big oil majors make have been falling precipitously. That puts so much pressure on them because they have promised to investors that they’re gonna provide huge dividends, do share buybacks, and, you know, apply cash back to their investors. So, low oil prices mean it’s much more difficult to do that. In a sense, they will be relatively happy that the prices have spiked back up by 6 per cent, you know, over the last 24 hours.
Marc Filippino
Jamie, what are you looking for next when it comes to this oil sanctions story?
Jamie Smyth
I mean, I think a real key issue on the sanctions is, does Trump actually go ahead and do these secondary sanctions? Because if he doesn’t, that actually . . . this increase in oil prices could ironically benefit Russia, because its economy depends so hugely on oil prices that if it’s able to continue shipping its oil and selling its oil, Russia will actually benefit from that unless it is made clear that buyers can’t be forced to stop purchasing the Russian oil.
Marc Filippino
That’s the FT’s Jamie Smyth in New York. Thanks, Jamie.
Jamie Smyth
Thank you very much.
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Marc Filippino
President Trump pardoned a cryptocurrency tycoon yesterday. Changpeng Zhao is the co-founder of Binance, the world’s largest crypto exchange. He pleaded guilty to criminal charges related to money laundering in 2023. Zhao was convicted when former president Joe Biden was in office. The White House said now that Trump is in office, the Biden administration’s war on crypto is over. Trump has also pardoned several other crypto executives, including the founder of the dark web marketplace Silk Road. The president is a big crypto enthusiast. The FT recently reported that Trump companies have made more than a billion dollars in pre-tax profits from crypto ventures over the past year.
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You may have noticed that the US has taken a keen interest in Argentina lately.
Donald Trump voice clip
Argentina’s one of the most beautiful countries that I’ve ever seen, and we want to see it succeed. Very simple.
Marc Filippino
President Trump’s administration has earmarked a $40bn rescue package for Argentina. The country needs that bailout to stabilise its markets. They’ve been turbulent since regional elections last month, when President Javier Milei’s party underperformed. But this weekend is the real test for Milei. Voters head to the polls on Sunday for midterm congressional elections, and if his party doesn’t do well, it’ll be a lot harder for Milei to continue his economic agenda. Plus, it could impact his relationship with the US. The FT’s Ciara Nugent is in Buenos Aires and she joins us now. Hi, Ciara.
Ciara Nugent
Hi, Marc.
Marc Filippino
So get us up to speed because a lot has happened since Milei took office about two years ago. He came in with this big promise to introduce some pretty tough austerity measures to cut down on massive inflation. What happened after that?
Ciara Nugent
Yeah, so he did that. He cut public spending by about 30 per cent overall, and that did have a big impact on inflation, which has fallen from almost 300 per cent in early 2024 to about 30 per cent now. But things have started to go quite wrong in the last few months. From a voter perspective, Milei’s strategies for lowering inflation have really started to weigh on economic activity. At the same time, the president has alienated the libertarian party’s main allies in Congress, and that’s a big problem because it has a really tiny minority of seats on its own. His government has had several corruption scandals crop up. Investors are really nervous that he’s not going to do well at the midterm elections, and that that will stop him from being able to continue his free market reforms and to continue his exchange rate policy, which has kept the peso very strong, and that has caused the peso to fall quite quickly in the last few weeks.
Marc Filippino
Right. And, and going back to the Trump thing I mentioned earlier, this is why the US government is intervening the way it is to prop up the peso. Ciara, you spoke to some voters recently, how are they feeling about all this?
Ciara Nugent
Yeah, so I went to Avellaneda, which is a working class town near Buenos Aires, and I found that a lot of people just felt like the economy was really stuck. I met Natalie Ríos, who is a teacher in Avellaneda.
Natalie Ríos voice clip
[Speaking in foreign language]
Ciara Nugent
And she voted for Milei in 2023 because she was really, really frustrated with this like runaway inflation. She has found though, that the last year have been really, really difficult. She told me she hadn’t realised that Milei’s reforms were going to be so painful for the middle class. She said she’d never struggled to make ends meet in the same way that she is now.
Natalie Ríos voice clip
[Speaking in foreign language]
Ciara Nugent
Because her salary has fallen quite far in real terms, which is a situation that a lot of Argentines are in. And it has really caused a kind of waning of enthusiasm among right-leaning voters.
Marc Filippino
Now these are the people who are a little on the fence when it comes to Milei. What did Milei’s supporters say to you?
Ciara Nugent
So Milei’s supporters think it’s kind of unfair to expect Milei to have solved all of Argentina’s really deep-rooted economic problems in just two years. I went to a rock concert that Milei put on in Buenos Aires earlier this month.
Marc Filippino
Sorry. Did, you say a rock concert?
Ciara Nugent
Yes. So, a couple of weeks ago, Milei put on this arena rock show.
[VIDEO CLIP PLAYING]
But he sang a bunch of songs for his fans outside the show. I met Leonel Lavallén who’s 23.
Leonel Lavallén voice clip
[Speaking in foreign language]
Ciara Nugent
He’s from rural Cordoba province and he works in pest control, and he’s a big Milei fan, and he told me that, you know, it’s true Argentines are not doing way better than they were before Milei took office.
Leonel Lavallén voice clip
[Speaking in foreign language]
Ciara Nugent
But that he really thinks Argentina is on the right path.
Leonel Lavallén voice clip
[Speaking in foreign language]
Ciara Nugent
And he hopes that his fellow Argentines kind of give Milei more seats in Congress and more time to continue with his reforms.
Marc Filippino
It’s important to point out here, Ciara, that the implications of this election don’t just pertain to Argentina. There are ripple effects that will go outside the country too. What are those?
Ciara Nugent
Totally. So, the Trump administration in the US has said it wants to give Argentina a $20bn currency swap line, which is effectively a loan to help Milei kind of survive this crisis and continue with his reforms. But last week, in a meeting with Milei in Washington, Trump said that if Milei loses the elections, like, we’re not going to be generous with Argentina. That sparked a lot of concern in Argentina’s markets that maybe if Milei loses the midterms, Trump could pull the plug on that loan, which would be pretty disastrous at this point for the peso. Scott Bessent, Trump’s Treasury secretary, has rowed that back and said that the support from the US is contingent on Milei’s reforms rather than on his success at the midterms. But, you know, it remains to be seen how easy the path from Milei’s reforms will be after the elections.
Marc Filippino
Well, we’ll just have to see what happens on Sunday. Ciara Nugent covers Argentina for the FT. Thanks, Ciara.
Ciara Nugent
Thanks, Marc.
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Marc Filippino
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This has been your daily FT News Briefing. Check back next week for the latest business news. The FT News Briefing was produced this week by Victoria Craig, Jess Smith, Sonja Hutson, Fiona Symon, Josh Gabert-Doyon, Ethan Plotkin and me, Marc Filippino. Our show is mixed by Kent Militzer and Kelly Garry. We had help this week from Michela Tindera, Peter Barber, David da Silva and Gavin Kallmann. Our acting co-head of audio is Topher Forhecz, and our theme song is by Metaphor Music.
