Don’t worry about it, it’s just a negotiating tactic. And the world’s anyway awash in crude.

That’s how I’m inclined to view new US sanctions on Rosneft and Lukoil which, along with a dizzying hodgepodge of subsidiaries, are now OFAC designated.

Ostensibly, these measures are a death knell. As of now, any foreign entity, including and especially banks, who does any business with Rosneft or Lukoil runs the risk of being sanctioned themselves. As the standardized information sheet noted, a foreign financial institution which transacts with Russia’s energy sector is a foreign financial institution inviting a Treasury ban on opening or maintaining a correspondent account in the US.

I used the word “ostensibly” because, again, this is just Donald Trump trying to secure some type of meaningful leverage in on-again, off-again Ukraine ceasefire talks with Vladimir Putin. Trump surely would rather not go this route. Russia’s proven remarkably (if predictably) adept at selling energy despite a web of international sanctions, but this is different. If sustained, these sanctions will slowly choke Rosneft and Lukoil and, importantly, the measures will also force Xi Jinping to increase his support for the Russian state lest Putin’s economy should finally succumb.

As of Thursday, doing any kind of “significant” business with Russia’s national energy champions is to risk being branded persona non grata by the US Treasury Department. That’s a total non-starter. No one save China (and entities which are already pariahs) is going to risk that. If you do (risk it), you’re jeopardizing every other business relationship you have. Because anybody who does any kind of business with you would be wittingly transacting with an institution in bad standing with OFAC, which is loosely akin to having lunch in broad daylight with a known terrorist financier.

On Wednesday, Trump did another one-eighty vis-à-vis Ukraine. “We canceled the meeting with President Putin. It just — it didn’t feel right to meet,” Trump said, while chatting with NATO chief Mark Rutte (who’s emerged as an unlikely Trump whisperer) at The White House. “Every time I speak to Vladimir, I have good conversations and then they don’t go anywhere. They just don’t go anywhere.”

Trump’s abrupt about-face was another example of his “last person I spoke to” bias. Just a few days previous, he reportedly got into a(nother) shouting match with Volodymyr Zelensky over Kyiv’s request for Tomahawks and then promptly demanded (on social media) that Ukraine give up territory held by Russia in order to secure a ceasefire. He’d spoken to Putin over the phone just hours earlier. Last month, after meeting with Zelensky on the sidelines of the UN summit, Trump suggested Ukraine might yet win the war and reclaim the Donbas.

By appearances, the new sanctions were at least in part motivated by Rutte’s exhortations, but Trump’s genuinely frustrated with Putin by now, which is to say wise to the fact that The Kremlin’s playing him for a fool. I’d say better late than never, but that feels somehow uncouth.

As the simple chart shows, the sanctions catalyzed a pretty good pop for Brent. If you roll up Thursday’s move with Wednesday’s you get a near 8% two-session rally, the most pronounced in years.

But that’s really not the story. Globally, there’s more than enough oil. The market’s if anything oversupplied, or about to be, and even if it wasn’t, Trump can always call in a favor in Riyadh. This is about Ukraine and Trump’s determination to secure peacemaker bragging rights, not pump prices in America. Trump’s got those well in hand. He’s in so good and so deep with the Saudis that it’s almost impossible to imagine a scenario where Mohammed bin Salman lets gas prices become a political liability for the GOP.

If Narendra Modi wasn’t already inclined to acquiescing to US pressure around India’s ongoing purchases of Russian oil, he will be now. Modi famously defied Trump’s demands to cease and desist buying crude from Moscow, inviting steep tariffs in the process. But it’s hard to understand how India can sustain purchases of large cargoes of what’s effectively contraband when anyone involved in the financing runs the risk of a Treasury ban.

That latter point gets at the problem with sundry “de-dollarization” narratives: They all sound plausible until push comes to shove, at which point you’re left to ponder the prospect of, for example, the Indian government paying Putin for oil in rupees. India’s made some progress in settling trade in local currency, but… well, do you want rupees for any oil you might be looking to sell? Not really? Me neither. You might want yuan, and India might be willing to pay you in yuan, but then what do you have? A bunch of not-freely-traded liabilities of (claims on) the Chinese Communist Party. And those liabilities are soft-pegged to the dollar. Insert Thinking Face emoticon.

Crucially, China can (and probably will) keep buying from Russia. The yuan’s a quasi-hard currency and if you’re cut off from the Western financial system as Russia is, CNY’s the next best thing to G7 claims assuming you want inside money (i.e., assuming you want something other than gold). So, Russia will gladly take CNY and China can obviously pay in it, but the list of structural problems with invoicing crude cargoes at scale in anything other than dollars is a mile long. I assume there’s enough available CNY paper to facilitate these purchases as they stand today, but as a seller of energy, you’re not going to accumulate stacks of physical Mao faces in a vault. Rather, you’ll want to recycle your renminbi into CGBs, and that market isn’t exactly famous for depth and liquidity.

Anyway, Trump likely has no intention of sustaining these sanctions. He’s just hoping (perhaps against hope) that he can bring Putin around. As Scott Bessent put it, “a permanent peace depends entirely on Russia’s willingness to negotiate in good faith.”

The effectiveness of OFAC sanctions, the press release reminded the world, “derive[s] not only from OFAC’s ability to designate and add persons to the SDN List, but also from its willingness to remove persons from the SDN List.” “The ultimate goal of sanctions,” Treasury went on, “is not to punish, but to bring about a positive change in behavior.”