US President Donald Trump announced on July 14 that the US could impose 100% secondary sanctions on any country that does business with Russia if no ceasefire deal in Ukraine is reached after a 50-days.

He is looking at you, China and India, who are now buying most of Russia’s crude exports after the EU sanctioned exports in 2022.

Russia typically exports some 5mn barrels per day (bpd) of oil, the vast majority of it going to Asia. But what will happen to the energy markets if Trump’s new tariffs effectively kill this business off? A sharp decline in Russian energy flows would almost certainly lead to higher global prices—particularly for natural gas – Capital Economics said in a note the same day. .

"The impact would probably be greater on natural gas prices than oil," said Kieran Tompkins, Senior Climate and Commodities Economist at Capital Economics, "depending on to what extent OPEC+ would step in and plug the shortfall in oil supply." He added that such a move could cause "severe fiscal strains for Russia, but Putin’s actions so far suggest that spending on the military might be prioritized over other spending."

The Kremlin has so far been unfazed by the threat of new sanctions targeting Russian oil exports. Deputy Prime Minister Alexander Novak said earlier this week that Russia is already used to sanctions and doubts that Trump’s proposed secondary sanctions will have any impact.

The EU has also been frustrated by the ineffectiveness of oil sanctions which have turned out to be largely a spent cannon. As part of the eighteenth sanctions package, currently being negotiated, the EU proposed unilaterally to adopt a floating rate oil price sanctions cap of 15% below market rates for the Urals blend, Russia’s main export product. Previously the cap was set at $60, but Russia has successfully dodged the sanctions thanks to its shadow fleet. Since the regime was introduced three years ago not one barrel of Russian oil has been sold under the $60 cap. Some Europeans called for the cap to be lowered to $45, after oil prices sank to around $60 last month, but the US vetoed the idea, afraid of pushing up prices at the pump ahead of mid-term elections next year.

Details of the new tariffs from the White House remain unclear, but the administration appears set to impose 100% tariffs on US imports from Russia and on imports from any country buying Russian energy, unless a deal to end the war is reached soon.

Liam Peach, Senior Emerging Market Economist at Capital Economics, noted that the immediate reaction in the oil market was muted: "The Brent crude price has fallen by just over 1% [on July 14], unwinding a portion of Friday’s rally."

This may reflect market expectations that the 50-day window leaves room to avoid disruption, and that the proposed tariffs are lower than the 500% rate outlined in Senator Lindsey Graham’s Sanctioning Russia Act of 2025, according to Peach.

"Trump’s revealed preference has been to prioritise low oil prices over spurring on domestic oil output, which suggests he may steer clear of wholesale disruption to the oil market at least," Peach added.

He also pointed out that the Sanctioning Russia Act included carveouts for national security interests, a mechanism Trump may use to prevent sharp price increases.

But if the tariffs are fully implemented, then the impact on the energy markets will be significant. Russia exported around 3.3mbpd of seaborne crude in 2024, mostly to China and India, and an additional 1.3mn bpd via pipeline. In total, Russian crude exports accounted for just under 5% of global oil consumption.

"The oil market appears to have sufficient spare capacity to more-or-less offset a loss of Russian exports," Tompkins noted, pointing to 5.5mn bpd of spare capacity held by OPEC+ (excluding Russia) as of June. However, much of this is already being drawn down.

"Utilising most of the world’s spare capacity would broadly shift the balance of risks so that they become symmetric," he said. "Removing that spare capacity would be akin to riding a bike with no shock absorbers—oil prices would feel every jolt from every exogenous shock."

The natural gas market could face even sharper effects. Russia accounted for 8% of global LNG exports last year, with substantial volumes going to countries within the US geopolitical orbit, including the EU, which remains one of Russia’s biggest customers. Russia also made up 20% of China’s combined LNG and pipeline gas imports, and still provided 10% of the EU’s pipeline gas in the first quarter of 2025, in addition to its LNG exports to Europe.

Tompkins warned: "There is currently little to no room to absorb an even further loss of Russian [gas] supply." While a global LNG supply boost is due by 2027, delays—including at Qatar’s North Field project—mean it may arrive too late.

But cutting off Russia’s oil revenues would do significant damage to Russia’s budget. While the share of oil and gas revenues in Russia’s budget has fallen from around 40% pre-war to around 25%-30% now, thanks to a military Keynesian-driven consumer boom, with non-oil and gas revenues now generating double the income of hydrocarbon exports, reducing the oil and gas revenues would still see the federal budget deficit soar from already distressed levels in June.

"A 100% tariff on exports to the US would have little impact," Peach said, noting US-bound trade was just $3bn in 2024. But secondary tariffs disrupting energy exports could be far more damaging. "We estimate that Russia exported just over $200bn of energy products last year," he said. "Knocking out half of Russia’s crude and petroleum exports could reduce export revenues by $75bn or so."

This could strain Russia’s current account surplus—estimated at $62bn in 2024—and lead to a weaker ruble and higher bond yields. With a third of federal revenues tied to energy taxes, a sharp export drop could trigger a nasty budget shortfall.

"As a rule of thumb, a 10% fall in energy tax revenues over one year would add 0.3–0.4% of GDP to the federal deficit," Peach said. "Russia can sustain such a deficit without major financing problems, but a lot would depend on the extent and speed of any hit to exports." Nonetheless, he concluded, "Putin’s decisions up to now suggest that he may continue to prioritise defence spending over other forms of spending."