Wednesday, August 13, 2025

The hidden WAR withing the WAR > <<>> U.S. Just DESTROYED the LAST THING Keeping Russia Alive - Moscow Cornere...

.the WAR 

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n this episode we trace the sanctions chain from June 2024’s hit on the Moscow Exchange to 2025’s tighter price caps, ship designations, and threatened secondary tariffs. We explain how OFAC’s updated guidance widened risks for foreign banks; how maritime rules, insurance proofs, and tanker blacklists raise Russia’s costs; why EU/UK’s July 2025 move to a floating cap (~$47.60) deepens discounts; and how refinery outages from Ukrainian strikes add domestic stress. We unpack the paradox of a stronger ruble—good for inflation optics, bad for budget conversion—and the Kremlin’s “Type‑C” and swap workarounds to unfreeze payments. Finally, we map scenarios if the White House follows through with secondary tariffs on buyers of Russian oil. The through‑line is simple: it’s not “are barrels moving,” but at what price, with what frictions, and how slowly does cash get home. Sources: 1. U.S. Treasury (OFAC) — June 12, 2024 Russia actions & bank guidance https://home.treasury.gov/news/press-... 2. Reuters — Moscow Exchange halts USD/EUR trading after U.S. sanctions https://www.reuters.com/world/europe/... 3. OFAC — Advisory for Foreign Financial Institutions (PDF) https://ofac.treasury.gov/media/93243... 4. OFAC FAQ 1184 — IT & cloud services prohibition (E.O. 14071) https://ofac.treasury.gov/faqs/1184 5. Price Cap Coalition — Updated maritime advisory (Oct 21, 2024, PDF) https://ofac.treasury.gov/media/93350... 6. European Council — Oil price cap update (July 18, 2025) https://www.consilium.europa.eu/en/pr... 7. Reuters — EU proposes floating cap 15% below market ($47.6) https://www.reuters.com/business/ener... 8. Reuters — U.S. envoy Steve Witkoff meets Putin (Aug 6, 2025) https://www.reuters.com/world/europe/... 9. Politico — Sanctioning Russia Act & tariff authorities (up to 500%) https://www.politico.com/news/2025/07... 10. Reuters — Trump tariff threats on Russia’s oil buyers; risks https://www.reuters.com/business/ener... 11. Reuters — Russia oil & gas revenue drops (June–July 2025) https://www.reuters.com/business/ener... 12. Reuters/IEA — Fuel export revenue down YoY (June 2025) https://www.reuters.com/business/ener... 13. Reuters — Refinery outages, Aug 2025 (Ryazan/Novokuibyshevsk; Afipsky fire) https://www.reuters.com/business/ener... https://www.reuters.com/world/europe/... 14. Reuters — Rouble performance 2025; macro context https://www.reuters.com/markets/curre... https://www.reuters.com/business/fina... 15. Reuters — Type‑C account swap tweak (Aug 7, 2025) https://www.reuters.com/business/fina... 16. The Moscow Times (via RBC) — Russian Railways unpaid‑leave policy https://www.themoscowtimes.com/2025/0...
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 TRANSCRIPT
 
Vladimir Putin is no longer just on the
defensive. He is in the midst of an
all-out alarm. Uh
I'm disappointed in President Putin.
On the one hand, US sanctions are
hitting the nerve centers of the Russian
economy.
Yeah, we're going to put sanctions. I
don't know that sanctions bother him.
On the other hand, Ukraine's attacks
have already wiped out about 20% of
Russian refinery capacity. What's more,
the latest threat to Putin's economic
lifeline is not a one-off pressure
tactic. It is the final link in a
strategy that has been quietly woven and
gradually tightened over the years. Now
Putin is cornered by US sanctions. For
Putin, it is no longer easy to sell oil
to his allies, escape Ukraine's attacks,
or circumvent US sanctions.
Since last year, Russian oil barrels
have begun to change hands in Asian
markets with increasingly larger
discount labels. In the international
banking system, the term secondary
sanctions has turned into a red line for
credit committees in cautious countries.
Transactions with Russia have been moved
to the high-risk category, and the US's
second round of sanctions hit the Moscow
stock exchanges. So, which date, which
decision, and which mechanism shattered
the Kremlin's financial backbone? To
which new breaking point is this chain
heading?
Everything broke on June 13th, 2024 when
Washington added the Moscow Stock
Exchange and its critical infrastructure
components to its sanctions list. On the
same day, the Moscow Stock Exchange
halted dollar and euro transactions.
Currency formation shifted to
over-the-counter markets and
transparency plummeted dramatically. The
screens went dark on the exchange and
the market moved to over-the-counter OTC
trading. Russian institutions are now
setting prices among themselves, but the
loss of a common reference point is
pushing the pricing of exchange rate
risk and corporate balance sheet
planning into a more uncertain
territory. This move should be read as a
direct blow to the financial
infrastructure. It is not the exchange
rate itself that has changed but how,
where, and by whom it is determined. In
the same document, the Treasury issued
guidelines drawing thick red lines for
foreign banks on which transactions
expose you to secondary risk. In short,
the exchange rate board has gone dark
and compliance units on the other side
are flashing red. The June 2024 update
turned another critical key. OFAC
expanded its definition of Russia's
military-industrial ecosystem.
Significant relationships with all
blocked individuals and entities under
presidential executive order 14,024
now pose a secondary sanctions risk for
foreign banks.
The practical result of this has been
extra controls, delays and increased
costs in open account, letter of credit,
correspondent banking and swap processes
in many markets including China. Some
banks have become cautious in certain
areas while others have seen a sharp
increase in price risk premiums. In
other words, the cost of doing business
with Russia suddenly rose not only as a
potential penalty but also as
operational friction which reduced the
flow of financial pipelines. This
package also imposed restrictions on
invisible areas such as IT services,
narrowing the bypass channels on the
software hardware side of supply chains.
Sanctions began to target not just the
asset itself but also the supporting
layers that enable it to function. In
January 2025, the pace accelerated once
again. The Treasury implemented a broad
package targeting the energy sector and
the maritime financial bridges that
support it. Risk warnings, restrictions,
and direct listings were issued for
hundreds of ships and service providers,
including major producers and
intermediaries. The logic was clear.
Russian barrels must pass through a
series of gates, insurance, financing,
routting, flag, and port services to
reach global markets. If you lock each
of these gates individually, even if a
barrel leaks through, costs rise in the
freight insurance service triangle and
discounts deepen. The same approach was
implemented throughout the year through
strict monitoring and updated compliance
guidelines based on the G7/EU/UK
price cap coalition recommendations.
Fine-t filters targeting gray areas such
as takeover flag management transfers
were introduced in tanker sales. As a
result of all these actions, even if the
Shadow Fleet finds a way through, it now
operates at a higher cost with greater
risk and at a slower pace. By July 2025,
Europe had tightened the cap mechanism
to a stricter level. The reference price
for crude oil was updated to 15% below
the market average with a benchmark of
roughly $47.6 per barrel being
discussed. In the same week, London
added 135 tankers operating in the
Shadow Network to the list in a single
move. Regardless of the ship's flag,
name change, or ownership structure, the
appetite of secondary actors waines as
soon as service, insurance, and port
access become risky. The ceiling was
theoretically established with the logic
of let sales continue even if revenue
decreases. In practice, it operates as a
machine that increases discounts to
suppress budget revenue while driving up
transportation and financing costs.
Therefore, the phrase sales are
continuing does not paint the whole
picture. The price, costs, and payment
terms determine the bottom line. The
real turning point in August 2025 was
when diplomacy and the energy war
converged at the same table. When the US
special envoy landed in Moscow on August
6th, he brought with him not only
diplomatic courtesy, but also a message
that would touch the Kremlin's nerve
endings. The envoy was Steve Witkov, a
well-known businessman. Accompanying him
was Coro Dimmitrev, one of Russia's
behind-the-scenes heavyweights and
Putin's trusted shadow adviser. Official
statements remained dry and distant.
Kremlin spokespeople acknowledged that
the meeting had taken place, but shared
only two headlines from the content. The
first was the war in Ukraine, and the
second was a vaguely defined possibility
of a new US-Russia strategic
partnership.
Then Russian foreign policy adviser Yuri
Ushikov made a brief but noteworthy
statement to the press. We sent some
signals on Ukraine and in return we
received signals from President Trump
that were in line with those signals.
This statement was not a concrete result
in diplomatic terms but rather a
maneuver to buy time. There was no
concrete agreement or a feasible
ceasefire schedule. Although the Kremlin
described the meeting as constructive,
what was discussed behind the scenes
went far beyond the official statements.
This is because there was another issue
on the table that was just as critical
as Ukraine. As you might have guessed,
this issue was oil. Approximately 40 to
45% of Russia's budget comes from crude
oil and petroleum products. These
revenues were also fueling the war in
Ukraine. Moreover, a large portion of
this export was carried out through
methods known as the shadow fleet.
Trump's message to Moscow was crystal
clear at this point. Either agree to a
ceasefire or these tankers will be your
next targets. The 2025 sanctions act
awaiting approval in Washington was the
framework for this message. The bill,
which has the support of both parties,
gives the US president the authority to
impose tariffs of up to 500% on any
country, including China and India, that
continues to purchase Russian oil. This
is not just about making Russian oil
more expensive, but effectively
excluding it from the global market.
Donald Trump recently made the limits of
this pressure clear. If oil prices drop
by another $10, Russia will have no
other option. Energy analyst Thomas
O'Donnell sums up the purpose of these
new sanctions in a single sentence. They
are designed not to reduce but to
completely
The plan is simple but effective. The US
and its allies will flood the market
with their own oil and natural gas
surpluses. This will facilitate the
implementation of secondary sanctions
and virtually eliminate Russia's chances
of finding new buyers. In such a
scenario, Moscow would not only lose
revenue, it would also lose the energy
industry that fuels the war, its naval
fleet, and its influence as a rulemaker
in global energy markets. For
Washington, this is a double win. The US
would both strengthen its energy
dominance and strike Putin with his own
weapon. If this coordination continues
uninterrupted, the map of global oil
flows could change in the coming period.
Official data already shows a sharp 27%
drop in oil and natural gas revenues
compared to the same period last year.
This translates to a 19% decline in the
state's total energy revenues. Under
normal circumstances, this figure alone
would be enough to set off alarm bells
in Moscow. However, there are other
blows that are exacerbating the
situation. First, Ukraine's drone
attacks on Novo have disabled one of
Russia's last major functioning export
ports. This port was not only critical
for crude oil shipments, but also for
refined product exports. The disruption
there has triggered a domino effect in
Russia's supply chains to the Far East
and South Asia. Just as this shock was
unfolding, the European Union took a new
step by lowering the price cap on
Russian oil. The maximum price allowed
per barrel will now be $47.60.
According to Brussels calculations, this
reduction will result in a loss of
approximately $18.75 billion in annual
energy revenues for Moscow. This is not
merely a theoretical estimate. Current
export figures and market trends
indicate a high likelihood that the loss
will reach these levels. However, the
crisis does not end there. Systematic
attacks on Ukraine's energy
infrastructure are severely eroding
Russia's refining and logistics
capacity. In particular, disruptions in
diesel production have caused a supply
shock in the domestic market. With
refineries offline and shipping routes
disrupted, diesel prices have risen to
such levels that freight trains can no
longer cover their operating costs. This
financial pressure has also impacted
Russia's most critical internal
logistics network, its railways. Some
workers on certain routes have been
granted 2 days of unpaid leave per month
due to the government's inability to pay
wages. This is weakening both workforce
motivation and transportation capacity.
On top of all this, the new sanctions
package that the Donald Trump
administration is preparing to implement
will further destabilize this already
collapsing system. What is happening
internally? The ruble strengthened
throughout 2025, reaching its best
levels against the dollar in 15 months
during the summer with appreciation
reaching 40% since the beginning of the
year. However, this is a currency regime
supported by capital controls, tight
monetary policy, and exporters foreign
exchange sales obligations rather than
natural market flows. Moreover, it is a
double-edged sword.
While the rubles's appreciation has
curbed import costs and provided
temporary relief for inflation, it has
weakened the conversion of oil and gas
revenues into rubles for the budget and
eroded exporters profit margins. This is
why the Kremlin's preference for a
controlled weak ruble is frequently
mentioned in the literature. However,
demonstrating exchange rate strength is
sometimes seen as a useful signal for
managing the financial friction created
by sanctions pressure. In short, the
exchange rate picture reflected
internally makes sense when read
alongside the pressure on payment and
shipment chains externally. The friction
on the payment side accumulates in
statistics as trade receivables. As the
banking channel slows down and becomes
more expensive, exporters extend more
credit to their buyers, creating an
invisible cost in cash flow. This
reliance on trade credit is one of the
clearest signs of the divergence in
trade and finance channels with Russia
since the war. And it is fueled not only
by banks reluctance, but also by
increased documentation requirements in
insurance and compliance layers. In
other words, the goods go, money comes
model is no longer a straight line.
Money is coming in later at a higher
cost with deeper discounts and a broader
risk carrier. This is putting much more
strain on the cash register than the
daily exchange rate. Another outlet has
emerged around type C accounts in the
context of frozen Russian assets in the
West and frozen foreign assets in
Russia. Moscow has been trying swap-like
exchange mechanisms and netting methods
for some time. The regulation dated
August 7th, 2025 opened this valve a
little more by allowing certain asset
transfers from type-c accounts belonging
to foreigners to be transferred to local
investors as part of swap transactions.
Legal experts are debating how practical
this will be in practice as the
counterpart value typically amounts to
restricted securities. But one thing is
clear, these moves signal an effort to
breathe life into frozen payment
channels through domestic domestic
solutions. On the western side, similar
designs such as securing Ukraine loans
with the proceeds of frozen assets were
discussed around the same time. The two
camps are testing different keys on the
same file. We can observe how the
bottleneck in the maritime sector has
grown through the maritime warnings
issued by the coalition government. The
shipping guidelines updated in the fall
of 2024 narrowed the gray areas with
provisions such as transparency in
tanker sales, separation of cost items
in the insurance chain, and
classification of unusual changes in the
birthing towing flagging processes as
compliance triggers. Claims like, "I
didn't break the price cap, I just
inflated the freight rate," have been
made harder to justify with lineby line
cost proof and third-party verification
in contracts. This means that the shadow
fleet has hit a thicker wall both
legally and operationally. The question,
has all this turned into panic in Moscow
is frequently asked. The official
language is based on resilience and
adaptation, but the data says price
discovery has become opaque, shipping
costs have increased, and payment
friction has grown. The strengthening of
the ruble has brought relief to imports
and labeling, but it is weakening budget
items denominated in rubles. exporters
profitability is caught in the middle of
the exchange rate discount freight trio.
On the financial side, attempts to
unlock the situation with national
solutions like type C are proceeding
with the logic of we'll settle the
frozen assets abroad through swaps while
the returns on frozen assets abroad are
being debated. In the maritime sector,
the cost of ship service insurance
services is rising as London and
Brussels tighten their caps. This raises
new questions for Asian buyers in terms
of the price advantage plus risk premium
equation. The Kremlin is responding to
this pressure through three channels:
currency and capital controls, domestic
financial swap solutions, and a shift in
the direction of exports. A show of
strength on the currency and exporters
foreign exchange sales obligations are
managing inflation expectations in the
short term while simultaneously
reversing the currency's impact on
budget revenues. To compensate for this,
maneuvering room is being sought in the
tax expenditure borrowing balance. Type
C and similar valves are being tested in
financial settlements. However, in
practice, these do not fully open the
broken chain, but only distribute the
pressure. Although the export direction
has shifted toward Asia, price caps and
service restrictions have made discounts
the new normal. Therefore, the net
rubble left in the Treasury from each
barrel sold is thinner compared to the
pre-war balance. Rather than asking
whether this picture shows traces of
panic or traces of a plan, the most
reasonable question is how fast is money
leaving the treasury and how fast and
with what difficulties is it returning?
The opacity of the exchange rate
shifting from the stock market to OTC
markets is disrupting price risk
transmission while rising costs at sea
and increasing compliance premiums at
banks are slowing down cash conversion
speeds. The Kremlin is aware of this and
is opening channels to keep the system
afloat through currency capital controls
and type-C valves. But the scope of
these channels is limited. It is easy to
say I am selling. But what really
matters today is under what conditions
am I collecting, in how many days, with
what risk premiums, and at what exchange
rate am I recording it in the budget.
The shield may continue to work, but its
strength depends on how much the vault
is leaking. What do you see? Is exchange
rate strength or friction in the vault
more dominant? If price caps and tanker
lists remain as strict until year end,
will the discount on Russian barrels
stabilize or will alternative routes
erode part of the cost? Will the
secondary risk guidance from the banking
side create a thicker caveat, especially
in Asian finance, or will it settle into
an acceptable risk premium standard in
selected channels? Share your thoughts
below. Let's enrich the discussion with
data. If you found this narrative
useful, subscribe, like, and share to
help us set the rhythm for new episodes
together. Thank you for watching.
 
 

 

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