US oil sanctions key to ending Russia-Ukraine war: Santosh Rao

Synopsis

The United States faces challenges in its sanctions against Russia. While aiming to cut Russia's oil revenue, a key lifeline, the US continues to source materials like fertilizers and nuclear components. Experts believe a comprehensive, joint effort might succeed this time. Both Russia and Ukraine need an exit from the conflict. The situation is impacting the global economy.

In a detailed discussion on ET Now, Santosh Rao from Manhattan Venture Partners weighed in on the ongoing sanctions against Russia and the challenges faced by the United States in enforcing them.

When asked about the apparent double standards of the US—continuing to source materials from Russia for industries such as fertiliser and nuclear while accusing other countries of funding the war—Rao acknowledged the complexity of the situation.

"Yes, I mean that is a good point. Even he was stumped when someone pointed out to him that you are still buying those things. So, I am sure they are working on it, that also takes a long time. But that is a different category. I do not know how big that part is. Oil is Russia's biggest lifeline and they need… If you can squeeze that, I think that is going to have a more immediate impact than the rare earth materials which is not that big from what I read. So, it is big but not that big," Rao explained.

He emphasised that while rare earth materials are important, the immediate focus remains on cutting Russia’s oil revenues, which constitute roughly 20–30% of its GDP. "Every bit counts because that is a commodity that everybody wants. So, I am not (3:37) that. It is important, but at some point it will get to that, that is the second layer of squeeze that we will see to do that. But at this point, cut the main lifeline…that is a huge thing and that will really throttle them," Rao said.

Rao also highlighted the challenges in ending the conflict, noting that strong leaders on both sides will resist threats and intimidation. "They need some offramp, both of them do, just get off and come to some kind of a settlement there. So, I do not know what that is and when that will happen, hopefully soon because it is definitely affecting the rest of the world," he added.

Addressing concerns over the historical inefficacy of US sanctions, Rao expressed cautious optimism about the current strategy. "Yes, this is going to be a joint effort and it is in everybody's interest to do this. So, this might succeed. It is going to take some time. I mean, we saw with Iran. They have come up with different ways to raise money…some kind of a barter system to bypass the sanctions," he said.

With the European Union now enforcing measures such as port restrictions on Russian ships, Rao noted that the current sanctions strategy is a comprehensive “360 view” approach. "So now they want to go all out…So this time it might work because now it is getting really long and really painful for everybody. So that is the main thing. Hopefully it will settle like I said but it is going to take some time," he concluded.

The discussion underscores the delicate balancing act faced by the US and its allies: squeezing Russia economically while navigating the geopolitical complexities that come with global dependencies on Russian commodities.

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