Filenews 21 July 2025
Before we get into the math, let's look at one word: energy. The Russian economy is very closely tied to oil prices. Russia exported about 2.8 billion tonnes of petroleum. barrels of oil in 2024 that brought it revenues of 192 billion euros. Dollars. So the central idea is simple: use U.S. energy production as a weapon to collapse the Russian economy and force it to end the war in Ukraine. Let's proceed to an analysis of the mathematics as Trump thinks of it, to see if it really makes sense.
The basics
Russia is indeed vulnerable. Russian exports of energy resources (oil, natural gas, etc.) brought in revenues of about 240 billion euros. in 2024. Compared to Russia's GDP, amounting to $2.2 trillion. These exports account for more than 10 percent of the country's total production, and oil accounts for 80 percent of its total energy exports.
One way for Trump to hit Russia where it hurts is to "flood" the global energy market with subsidized U.S. oil. Suppose Trump offers a $20 per barrel subsidy on U.S. oil. This equates to a 30% subsidy on the current price of U.S. crude at $67, making WTI irresistibly cheap at $47 a barrel.
The U.S. has a lot of production potential. At the peak of their production capacity, they can pump 14 million barrels per day. The problem is that fracking (hydraulic fracturing for oil extraction) stops when prices fall significantly for the activity to be profitable. This subsidy will maintain production, regardless of market conditions.
Economic logic
This is where the issue becomes interesting from a budgetary point of view: the hypothetical subsidy of $20 per barrel for the production of $14 million. per day corresponds to a cost of 280 million barrels. dollars per day for the US. And if the U.S. is willing to maintain this subsidy for 6 months, the total bill will exceed $50 billion. dollars.
Is the amount huge? Not exactly, if you take into account the broader economic picture. The U.S. has a debt of $36.6 trillion. At an average interest rate of 3.3%. Every 1% drop in interest rates saves 366 billion euros a year. from interest payments.
If cheap energy helps bring inflation down and gives the Fed room to cut interest rates significantly, the subsidy could be repaid many times over. In addition, lower energy costs would pass across the economy: from data centers to shipping, creating deflationary pressures that could offset any price increases due to tariffs.
Strategic risks
The plan has vulnerabilities. Putin may escalate his attacks on Ukraine instead of reaching a ceasefire agreement if he is squeezed economically. Historically, Russia has responded by stepping up its aggression when it feels it is existentially threatened, rather than retreating.
China remains the wild card. As a major buyer of energy from Russia, Beijing could support the Russian economy, even if the U.S. offered cheaper alternatives. However, the scenario with very high oil subsidies, even $30-40 a barrel, could drastically change the situation. If prices fell significantly, perhaps China would prioritize its economic interest over Russia's support.
The reality
This strategy essentially treats subsidies as the lesser evil compared to the costs of protracted war conflicts and economic instability. For economic pressure to achieve what military aid has failed to achieve, namely to end the war, is a high-risk bet.
Mathematics works on paper, but geopolitics rarely follows economic theory. Russia's ability to withstand economic adversity is impressive, and the assessment that cheap energy will lead to cuts in the Fed's interest rates includes several variables – of an economic nature – that are not always predictable.
Nevertheless, when weighed against the alternatives – continued military spending, prolonged instability and economic uncertainty – a $50 billion energy subsidy is a huge boost for the economy. seems like a reasonable risk, not a reckless expense. Whether it would really work depends on variables that no spreadsheet can accurately capture.
