U.S.-Russia Understandings and Their Potential Impact on Global Energy Markets

On March 17, 2025, U.S. President Donald Trump and his Russian counterpart Vladimir Putin agreed to a “limited truce” in Ukraine for thirty days, which includes refraining from targeting energy facilities and infrastructure by both Russian and Ukrainian forces. They also pledged to work “swiftly” toward a “comprehensive truce” to end the war that has been ongoing between the two sides for over three years.

If Presidents Trump and Putin succeed in reaching “understandings” that serve their mutual interests regarding major contentious issues between Washington and Moscow—whether concerning how to end the war in Ukraine or future dealings with China, Iran, and other unresolved matters—it is not unlikely that the Trump administration would ease the harsh sanctions imposed on Russia’s energy sector. This easing could be seen as the “price” for reaching such understandings with Moscow.

Additionally, lifting sanctions on Russia would, in the view of many observers, help fulfill one of President Trump’s key campaign promises: reducing gasoline prices for American consumers and, consequently, lowering inflation in the country. Trump has repeatedly stated that he wants to see gasoline prices at U.S. pumps drop to $1.87 per gallon, which, according to many experts, would require global oil prices to fall to around $20 per barrel—a scenario deemed “not unlikely” if Russian exports return to pre-war levels in the global oil market.

Although oil prices in global markets dropped below $70 per barrel in mid-March 2025 following phone calls between the U.S. and Russian presidents and talks between U.S. and Russian officials in Saudi Arabia regarding Ukraine, these prices remain “much higher” than Trump’s target. Therefore, many experts expect Washington to continue its efforts to reach an understanding with Russia to push for a further decline in global oil prices, aligning with Trump’s ambitions in this regard. These experts also note that the current U.S. administration’s approach to cooperating with Russia in the energy sector marks a “reversal” from the stance of the previous Biden administration, which had insisted on maintaining harsh sanctions on Russia’s energy sector since the outbreak of military operations in Ukraine in February 2022. That position was based on the need to deprive Moscow of the massive financial revenues from its exports, thereby stopping Russia’s “aggression” against Ukraine.

Strong Motivations for Putin

Similarly, Russian President Putin has strong incentives to reach “understandings” with his U.S. counterpart that could lead to the lifting of sanctions on Russia’s energy sector. For instance, Putin is well aware that his country is just a few months away from exhausting all its financial reserves, while simultaneously grappling with 10% inflation and record-high interest rates of 21%. Many observers confirm that Putin is now highly willing to strike “some kind of deal” with the U.S. to restore the Russian economy’s health by regaining financial revenues from resumed oil exports to the global market.

Additionally, Moscow may see the lifting of sanctions on its oil exports as an “opportunity” to drive down global oil prices, thereby delivering a “heavy blow” to many U.S. shale oil companies—especially if global oil prices fall below $50 per barrel.

Potential Impacts on the Global Energy Sector

The “Trump-Putin understandings” will likely have significant repercussions for global oil markets. For example, these understandings could include an (implicit or explicit) agreement that Washington must be involved in any future deals between Moscow and the OPEC+ alliance (led by Saudi Arabia) regarding adjustments to global oil supply. If implemented, such understandings could disrupt the budgets of many Gulf Arab states—particularly those tied to major development projects where their “break-even” price ranges between 80and80and90 per barrel.

Secondly, U.S.-Russia understandings could also lead to the potential return of more Russian gas to European markets, where imports of Russian gas have sharply declined—from about 450 million cubic meters per day at the end of 2021 to just 150 million cubic meters per day in February 2025. A recent Financial Times report about plans by the former head of Nord Stream 2’s parent company to soon restart the pipeline—with U.S. firms acting as intermediaries between Russia and European consumers—further supports this possibility. If realized, some observers predict a resurgence in Russian gas supplies to Europe, leading to a decline in global liquefied natural gas (LNG) prices.

Thirdly, Trump-Putin understandings could pave the way for joint U.S.-Russia energy projects. For example, American and Russian companies might collaborate on oil and gas exploration in challenging regions like the Arctic, where Russia has extensive expertise while the U.S. possesses advanced technology. Additionally, Washington and Moscow could cooperate on developing fourth-generation nuclear reactors or safer uranium enrichment technologies, alongside agreements to prevent nuclear proliferation. U.S. firms may also seek partnerships with Russian counterparts to develop infrastructure projects, such as pipelines linking Russian energy fields to global markets.

Fourthly, U.S.-Russia understandings could disrupt the growing partnership between Russia and China in projects like the Power of Siberia gas pipeline, as Moscow may redirect exports toward more profitable Western markets compared to China. Beijing has so far reaped enormous profits from natural gas trade with Russia, benefiting from discounts due to international sanctions on Moscow.

Major Challenges

Despite the shared interests and mutual benefits that Trump-Putin understandings could bring, they will face significant challenges in the energy sector. For instance:

1. Competition in European Gas Markets: U.S. and Russian firms will fiercely compete for access to Europe’s lucrative natural gas markets.
2. OPEC+ Coordination Issues: Moscow may hesitate to involve Washington in future OPEC+ agreements on global oil supply adjustments, especially given the expected decline in global oil demand in the near term. The International Energy Agency (IEA) warned on March 13, 2025, that global oil supply could exceed demand by 600,000 barrels per day this year, driven by rising U.S. production and weaker-than-expected demand due to escalating trade tensions.
3. European Sanctions Persistence: European nations are unlikely to ease energy sanctions on Russia, as securing alternative LNG supplies has become a “European security priority.” The EU recently imposed a 16th sanctions package on Moscow, expanding restrictions on Russia’s oil tanker fleet and its SPFS financial transfer system (an alternative to SWIFT).

Two Possible Scenarios

Ultimately, Trump-Putin understandings on key disputes—especially the Ukraine crisis—could open the door to lifting harsh international sanctions on Russia’s energy sector. If successfully implemented, global energy markets will likely see significant near-term impacts. However, U.S.-Russia energy cooperation will likely remain “hostage” to broader geopolitical tensions between the two sides.

Two fundamental scenarios emerge:

1. Cooperation Scenario: Increased trust between Trump and Putin leads to an agreement on sharing global energy markets, resulting in relative stability in oil and gas prices under a “partial and gradual” lifting of sanctions on Russia’s energy sector.
2. Conflict Scenario: A breakdown in trust between the two leaders leads to escalation and competition, causing extreme volatility in global oil and gas prices and further destabilizing the world economy.