Trump's Iran Ultimatum: A 25% Tariff on All Partners

Russia is actively developing new strategies to bypass the latest US sanctions, ensuring the continued flow of its discounted crude oil to India, one of its most important customers.

Since the war in Ukraine began, India has emerged as the second-largest global buyer of Russian crude, taking advantage of steep discounts offered in the face of Western economic pressure. This trade relationship has strained ties between the US and India, with the Trump administration accusing New Delhi of financing Moscow's war effort.

Figure 1: Russian President Vladimir Putin and Indian Prime Minister Narendra Modi have maintained strong political and economic ties, underpinning the ongoing energy trade despite pressure from the US.

US Pressure Mounts on New Delhi

The diplomatic and economic friction has escalated in recent months. In August, the Trump administration imposed a punitive 25% tariff on Indian imports to the US, directly linking the measure to India’s purchases of Russian crude.

India, however, refused to alter its policy, asserting that its energy decisions are a matter of national sovereignty and would not be dictated by other nations. Trade negotiations between the two countries have since stalled. The White House recently intensified its threats, floating the possibility of 500% tariffs and withdrawing from several India-led global initiatives if the oil purchases continue.

Sanctions Show Initial Impact

The latest round of US sanctions, implemented at the end of November, was designed to specifically disrupt the Russia-India oil trade. The rules targeted any company or refinery purchasing oil from Rosneft and Lukoil, Russia's two largest oil exporters and the primary suppliers to the Indian market.

Initial figures suggest the sanctions had an effect. In December, India's imports of Russian oil fell by approximately one-third, dropping from a daily average of 1.7 million barrels to around 1.2 million barrels.

Despite this decline, industry analysts remain skeptical that these measures will sever India's reliance on Russian crude in the long run. Even after the sanctions took hold, four of India’s seven largest oil refineries continue to operate primarily on Russian oil.

Russia's Playbook: Shadow Exporters Emerge

Evidence already suggests that Russia is reorganizing its supply chain to help partners like India circumvent the sanctions. A significant loophole allows refineries to avoid US penalties as long as the crude is supplied by a company other than Rosneft or Lukoil.

By December, export data revealed the emergence of several new Russian oil exporters. These entities are believed to be shadow middlemen, created to stand between Russia's oil giants and foreign refineries.

"It looks like the new players are emerging, which is a sign that Russia is already trying to reorganise the supply chain," said Homayoun Falakshahi, head crude oil analyst at Kpler. "Obviously the Russians are not going to sit and just watch the sanctions take effect, they will try to bypass them as much as they can."

Falakshahi predicts these new companies will soon dominate exports, estimating it will only take "two or three months until the full supply chain gets reorganised." After that, he expects most barrels will be supplied by firms not named Rosneft or Lukoil, effectively neutralizing the sanctions.

The Irresistible Logic of a Steep Discount

For a country like India, which imports 90% of its oil, the economic incentive to buy Russian crude is powerful. Following the latest US sanctions, the discounts have become even more attractive, with Russian barrels selling for $9 to $10 less than comparable oil from Saudi Arabia or Iraq.

"For the companies that are still willing, buying Russian oil is a risk worth taking because it would represent savings of almost $4bn over a year," Falakshahi noted. "We expect that imports, at least by India's public sector, will soon return to the levels seen previously."

June Goh, a senior oil market analyst for Sparta Commodities, echoed this sentiment. "The discount is just too attractive for the Indian refiners not to buy the oil," she said. This market reality was reflected in global oil prices, which initially rose on the news of the sanctions but have since fallen back as traders concluded that enforcement would be limited.

One Exception: Reliance Halts Russian Imports

Not all Indian refiners are continuing with Russian oil. Reliance, India's largest private oil company and previously a top buyer, announced it would no longer import Russian crude for its Jamnagar refinery. The company cited its "impeccable record" of complying with sanctions, and January marked its first month with zero Russian imports.

This move appears to be a response not only to US pressure but also to EU sanctions that prevent Russian-origin oil processed in a third country from entering the European market. As the EU is a major export destination for Reliance's diesel and jet fuel, violating the sanctions posed a significant business risk.

As Reliance looks for alternatives, analysts suggest an opportunity may be emerging. The company is reportedly in talks with the US for authorization to resume purchases of Venezuelan oil, a market India previously sourced from before sanctions were imposed. A Reliance spokesperson confirmed they would "consider buying the oil in a compliant manner."

In a landmark development for global energy markets, coal-fired power generation in China and India fell simultaneously last year, an event not seen since the 1970s. According to new analysis, this historic shift was driven by a record-breaking expansion of clean energy, signaling a potential turning point for global carbon emissions.

A Landmark Decline in Coal Consumption

Research from the Centre for Research on Energy and Clean Air, commissioned by Carbon Brief, reveals that electricity generated by coal plants dropped by 1.6% in China and 3% in India during the past year.

The simultaneous decline in the world's two largest coal-consuming nations is a significant milestone. The report describes the drop in coal power and the corresponding surge in clean energy as a "historic moment" that could be "a sign of things to come."

The global implications are substantial. Together, China and India accounted for over 90% of the increase in global carbon emissions between 2015 and 2024. A sustained reduction in their coal dependency could signal a peak in worldwide coal consumption and, consequently, global emissions.

Record Clean Energy Growth Fuels the Transition

The primary driver behind this downturn in coal use was the explosive growth in renewable energy capacity in both countries. The rollout of new clean energy projects was so extensive that it not only met rising electricity demand but also began to displace existing coal-fired generation.

China's Unprecedented Renewable Expansion

China led the charge with a massive build-out of renewable infrastructure. Last year, the country added over 300 gigawatts (GW) of solar power and 100 GW of wind power. To put this in perspective, this combined capacity is more than five times the total existing power generation capacity of the United Kingdom. The report notes these figures are "clear new records for China and, therefore, for any country ever."

India's Progress Aided by Multiple Factors

India also made significant strides, adding 35 GW of solar, 6 GW of wind, and 3.5 GW of hydropower. The analysis found that this growth in clean energy was responsible for 44% of the reduction in coal and gas power generation compared to the previous five years.

However, the reduction in India was also influenced by other factors. Milder weather contributed to 36% of the fossil fuel reduction, while slower growth in underlying energy demand accounted for another 20%. This suggests that a severe summer, which would increase demand for air-conditioning, could potentially reverse some of these gains.

Global Context and Future Outlook

This positive development comes after a period of uncertainty for global coal markets. Russia's war on Ukraine caused a spike in global gas prices, prompting many developing nations to turn to cheaper coal and delaying an anticipated peak in global coal power.

Just over a year ago, the International Energy Agency (IEA) projected that a rebound in coal use following the pandemic could keep consumption at near-record levels until 2027. The latest data from China and India presents a powerful counter-narrative, suggesting the global energy transition may be accelerating faster than previously expected.

The Japanese yen tumbled to its lowest point against the US dollar since July 2024, as speculation intensified that Prime Minister Sanae Takaichi may be preparing to call a snap election.

On January 13, the currency weakened by as much as 0.5%, hitting 158.91 per dollar and breaking its previous low of 158.87 set in January 2025. In contrast, Japan's Nikkei share index surged, climbing as much as 3.6% after local media reported that Ms. Takaichi intends to dissolve parliament on January 23. This move would pave the way for a general election as early as February 8.

Election Politics and the "Takaichi Trade"

An early election could serve to reinforce the prime minister's authority, especially given her high popularity. This political maneuver would likely breathe new life into the "Takaichi trade," an economic strategy associated with her administration that has previously contributed to a weaker yen and losses in the bond market.

Fundamental Pressures on the Yen

The yen's decline is not solely driven by political news. It was the worst-performing currency among its Group-of-10 peers in 2025, managing only a 0.3% gain against the dollar. Several underlying factors continue to weigh on the currency:

• Wide US-Japan yield gaps: The difference in interest rates between the two countries makes holding dollar-denominated assets more attractive.

• Negative real rates: Japan's interest rates remain low, eroding the yen's value.

• Persistent capital outflows: Money continues to leave Japan in search of higher returns elsewhere.

Reflecting these pressures, some currency analysts forecast the yen could weaken further, potentially reaching 160 per dollar or beyond by the end of 2026.

Intervention Risk Back in Focus

The rapid currency slide has put Japanese officials on high alert. Finance Minister Satsuki Katayama has escalated warnings against what she describes as "excessive and speculative" moves in the foreign exchange market. These concerns were also shared with US Treasury Secretary Scott Bessent during a bilateral meeting in Washington.

This brings the possibility of direct government intervention back into the spotlight. The Ministry of Finance last stepped into the currency market on July 12, 2024, when the dollar-yen rate reached a daily high of 159.45. The ministry intervened three other times that year when daily highs hit 161.76, 160.17, and 157.99.

Officials have consistently stated that they are more concerned with the speed and volatility of the yen's movements rather than any specific exchange rate level. In Japan, intervention decisions are made by the Ministry of Finance and carried out by the Bank of Japan, which typically sells US dollars to strengthen the yen.

U.S. Securities and Exchange Commission (SEC) Chair Paul Atkins has indicated that the government's response to unconfirmed reports of Venezuela holding a massive $60 billion Bitcoin reserve is still an open question, stressing that any such decision is beyond the SEC's purview.

Speaking with Fox Business on Monday, Atkins addressed claims that Venezuela possesses up to 600,000 BTC. When asked if the United States would "take those Bitcoin," he deferred, stating, "I leave that to others in the administration to deal with — I'm not involved in that."

Venezuela's Unverified $60 Billion BTC Hoard

The speculation surrounding Venezuela's crypto holdings emerged after U.S. forces, acting on President Donald Trump's orders, captured then-President Nicolás Maduro for criminal proceedings in New York.

Despite the explosive nature of the reports, blockchain analysts and intelligence platforms have so far been unable to verify the existence of the $60 billion crypto stash. However, the Maduro regime has a history of involvement with the digital asset industry. In 2018, the country launched its own oil-backed digital currency, demonstrating a clear interest in the sector.

US Crypto Regulation Faces Key Senate Test

While international crypto enforcement remains a complex issue, the focus in Washington is turning toward domestic market structure. Atkins' comments came just days before the U.S. Senate Banking Committee is set to hold a markup on the Digital Asset Market Clarity Act, also known as CLARITY.

The bill, which aims to establish a clearer regulatory framework for digital assets, was passed by the House of Representatives in July. Its progress in the Senate has been slow, partly due to a 43-day government shutdown in October and November.

The legislation still faces several hurdles. Key points of contention include:

• Stablecoin Rewards: Banks and some crypto companies have raised concerns about provisions targeting stablecoin rewards.

• Ethics and DeFi: Many Democrats are pushing for stronger ethics guardrails and more precise rules governing decentralized finance.

The bill's path forward is uncertain, with potential delays from the upcoming 2026 midterm elections and the possibility of another government shutdown at the end of January. A central goal of early drafts is to grant the Commodity Futures Trading Commission (CFTC) expanded authority to regulate digital assets.

Canadian Prime Minister Mark Carney departs for China on Tuesday for a critical summit on trade and international security, a move that comes as Canada's relationship with the United States faces growing uncertainty from a trade war and annexation threats by President Donald Trump.

The visit is the first to Beijing by a Canadian prime minister since 2017 and signals a potential turning point in relations between the two nations. It follows a period of strained ties under former Prime Minister Justin Trudeau, which deteriorated after Canada arrested the chief financial officer of Chinese tech giant Huawei in 2018.

This trip was set in motion last October when Carney met with Chinese President Xi Jinping in South Korea. While that meeting produced no major breakthroughs, it opened the door for deeper engagement. Now, experts anticipate that concrete deals, or at least promises of future agreements, are on the table.

Figure 1: Prime Minister Mark Carney, pictured here at a 2025 summit, is set to visit China in an effort to redefine Canada's trade and security alliances.

A Calculated Pivot from Washington

Analysts believe the visit is far more than a symbolic gesture and will be watched closely in Washington. Greg MacEachern, a former senior Liberal ministerial adviser, noted that an invitation for a prime minister to visit China is rarely for "window dressing."

"There's a political risk this could upset President Trump, but Prime Minister Carney clearly wants to send the message that Canada is open for business," MacEachern said. "And the Canadian government has made the calculation that it's worth it."

Senior Canadian officials have confirmed that Carney is expected to sign several memoranda that are currently under discussion. For its part, the Chinese foreign ministry stated it looks forward to deepening mutual trust with Canada during the visit, which runs from January 14-17.

Crude Oil and Canola Top the Economic Agenda

High on the agenda are key Canadian exports, particularly crude oil and canola.

According to a source familiar with the talks, potential deals could pave the way for increased exports of Canadian crude to China. Currently, Canada sends about 90% of its oil to the United States. However, a planned increase in U.S. oil imports from Venezuela threatens to reduce American demand for Canadian crude, making diversification a strategic priority.

Progress is also expected on the issue of Chinese tariffs on Canadian canola exports, though senior officials do not anticipate a definitive resolution during the trip. China imposed preliminary anti-dumping duties on Canadian canola in August, escalating a year-long dispute that began after Ottawa placed tariffs on Chinese electric vehicle (EV) imports. These duties have effectively halted canola exports to what was once its largest market.

Colin Hornby, head of the Manitoba farm group Keystone Agricultural Producers, expressed cautious optimism, stating that while he doesn't expect an immediate agreement to lift the tariffs, he is hopeful for a resolution in the coming weeks or months.

Navigating Tariffs and Domestic Politics

The trade friction originated with Canada's tariffs on Chinese EVs, a policy introduced under the administration of former U.S. President Joe Biden. Lynette Ong, a professor of Chinese politics at the University of Toronto, suggests that with the recent souring of Canada-U.S. relations, maintaining alignment with Washington on this issue is no longer a priority for Ottawa.

The situation is further complicated by domestic politics. Doug Ford, the premier of Ontario, Canada's auto manufacturing hub, has urged Carney not to "back down," arguing the EV tariffs should only be removed if China commits to opening a manufacturing facility in the province.

"Both Canada and China want to signal their good intentions, so they each need to give away something," Ong explained, highlighting the delicate negotiations at play.

Balancing Trade with Security and Human Rights

Despite the economic opportunities, the push for closer ties with China comes with significant concerns. Vina Nadjibulla, vice-president of the Asia Pacific Foundation of Canada, warned that increased cooperation in sensitive sectors like AI and critical minerals could jeopardize Canadian security. "There are clear red lines not to be crossed," she stated.

Canada has previously voiced concerns over human rights violations in China, including:

• The jailing of pro-democracy media mogul Jimmy Lai.

• The secret execution of four Canadians in China last year.

• Past interference in Canadian elections.

Cheuk Kwan, co-chair of the Toronto Association for Democracy in China, said he hoped Canada would "not fall into the trap of appeasing China just to secure bilateral trade agreements."

The diplomatic sensitivity of the visit was underscored when two Canadian Members of Parliament announced they were ending a trip to Taiwan ahead of Carney's arrival in China to avoid any confusion with Canada's official foreign policy.

China's Potential "Charm Offensive"

China appears to be rolling out the red carpet, with plans to welcome Carney at Beijing's Great Hall of the People. Joseph Torigian, an expert on Chinese politics at American University, described this as part of a potential "charm offensive."

Torigian suggested China may be looking to bolster its global reputation, especially after the recent U.S. seizure of Venezuelan President Nicolas Maduro. "The Chinese might make a case during bilateral meetings with Canada about how unreliable the U.S. is as a partner and how dangerous they are," he said. "Whereas China is willing to help Canada expand its trade relationships outside of its hemisphere if the Canadians are willing to play ball."

Venezuelan opposition leader and Nobel laureate Maria Corina Machado is scheduled to meet with US President Donald Trump at the White House this Thursday, according to US media reports.

The meeting comes on the heels of a decisive US military operation in Venezuela. The Trump-ordered intervention led to the removal of President Nicolas Maduro, who was subsequently transported to the United States to face charges related to drug smuggling.

A Shift in Washington's Stance

This invitation marks a significant shift in President Trump's approach to Maria Corina Machado. Previously, the US president had sidelined her as a potential successor to Maduro, publicly questioning whether she had enough support or respect within Venezuela. Instead, the Trump administration had focused on direct negotiations with Maduro's Vice President, Delcy Rodriguez.

Machado recently re-emerged on the international stage after months in hiding. Her first public appearance was in December in Oslo, where she accepted her Nobel Peace Prize. She later confirmed that she had received assistance from the United States to leave Venezuela undetected.

Venezuelan opposition leader Maria Corina Machado at the Nobel Peace Prize ceremony in Oslo.

It is widely known that President Trump has expressed a desire to receive the Nobel Peace Prize himself, frequently citing his role in ending various conflicts.

Can a Nobel Prize Be Transferred?

In what appears to be a diplomatic gesture, Machado hinted she might offer her Nobel medal to Trump. Speaking on Fox News, she framed the award as a prize for the Venezuelan people and expressed a desire to "give it to him and share it with him."

However, the Nobel Institute in Oslo quickly clarified the rules surrounding the prestigious award. In an official statement, the institute confirmed that a prize cannot be transferred or shared after it has been awarded.

"A Nobel Prize can neither be revoked, shared, nor transferred to others," the statement read. "Once the announcement has been made, the decision stands for all time."