Of America’s four principal geostrategic adversaries – China, Russia, Iran, and North Korea – two are petrostates highly dependent on oil revenues to fund their national ambitions. Petroleum comprises 20 percent of Russia’s GDP and 25 percent of Iran’s GDP, but Washington’s sanctions against their oil exports have yet to fully exploit this vulnerability.
There is, however, an unorthodox avenue available: the Trump Administration should consider a bold economic offensive that deliberately crashes global oil prices via unprecedented and continuous oversupply.1
By simultaneously maximizing global oil production and selectively lifting sanctions on Russian and Iranian crude exports – while also keeping natural gas and other products embargoed – the United States could flood the global market and dramatically drive down oil prices. If oil prices dip into the $30 per barrel range, the United States would effectively drain the war chests of both adversaries while also delivering significant benefits to American consumers and allies alike.
Oversupply To Overwhelm
Dramatically increasing global oil production is the first step. The administration should subsidize American producers, particularly shale operations that would suffer most from low prices, to drill at maximum capacity and open new sites. Simultaneously, Washington should strike production deals with Canada, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates.2 These nations possess spare capacity and strategic incentives to cooperate in accepting short-time pain to severely weaken shared adversaries in the long term.
The second step is more provocative – lift sanctions on Russian and Iranian oil exports while maintaining restrictions on drilling equipment and technology. Both Russia and Iran are already producing at maximum capacity due to their war economies.3 By allowing their oil to reach global markets while preventing capacity expansion, Washington would flood the market with its adversaries’ product while barring them from claiming any of the benefits.
The logic is straightforward: if Russia and Iran need to sell oil more than the world needs to buy their specific barrels, then, in a saturated market, they become price-takers, not price-makers.
The financial impact on Moscow and Tehran would be catastrophic.4 Russia’s budget assumes prices above $60 per barrel, even with the discounts they must offer to sell oil due to sanctions. At $30 per barrel, the Kremlin will face massive deficits that would make its war in Ukraine ultimately unsustainable. Procurement, enlistment incentives, and military industry all depend on petroleum revenues that would evaporate under such a scenario. As of June 2025, Russia’s national welfare fund is at $36.4 billion in liquid assets – down from its prewar peak of $113.5 billion in early 2022.
Iran is even more vulnerable. The regime’s survival depends on subsidizing food, fuel, and services for its population while funding proxy networks in Yemen, Iraq, Palestine, Lebanon, and elsewhere. With oil revenues slashed, Tehran would confront a dilemma of where to spend rapidly dwindling funds.
Russia and Iran have structured their economies around oil prices such that these prices are now their most critical vulnerability. A sustained price collapse would shake the very ground beneath them. Moscow and Tehran would then have to choose between continuing costly foreign adventures while facing severe domestic unrest, or negotiate with the West from dramatically weakened positions.
The policy would also advance American interests in other parts of the world. Venezuela, another irritant petrostate, would face additional problems as oil revenues decline.5 American allies in Europe and Asia would see their energy costs drop, strengthening their economies and reducing their dependence on Russian energy. India and Japan, both crucial partners facing Chinese pressure, would particularly benefit from lower energy costs that would boost their economic competitiveness.6
Dropping Domestic Prices
The policy’s domestic benefits would be most beneficial of all.
Oil prices drive market prices. Transportation, manufacturing, agriculture, and consumer goods all depend on petroleum. (Essentially, if it moves, it needs oil.) Consequently, cheap oil would dramatically reduce the Consumer Price Index, delivering real wage increases to American families while boosting economic growth.
High energy costs have consistently undermined presidential approval ratings, while periods of cheap oil coincide with optimism and stability. An administration that delivers relief at the pump gains enormous public support for broader policy initiatives.
Critics will argue that low oil prices hurt American producers and undermine energy independence. The concern is valid but manageable – through targeted subsidies that maintain domestic production capacity while allowing market forces to pressure adversaries. The policy would also have to include sunset provisions and regular reviews to ensure effectiveness.
A True Policy Innovation
The idea of a free and impartial global market for goods is a polite fiction. Powers have manipulated access to resources for their own advantage long before Hugo Grotius first argued they ought not to.7 It is neither novel nor unethical to do so with purpose. If the United States is serious about its new realist posture, it must stop pretending the marketplace is sacred. It is time to wield America’s economic might to shape global markets in service of strategic objectives.
After three and a half years of incremental, seemingly inexorable Russian gains in Ukraine, with Iran currently prostrated under Israeli air supremacy yet insistent on enriching uranium for nuclear weapons, American efforts to get both adversaries to cease their aggressive behavior have, thus far, stalled. The situation in both theaters has reached an impasse. It is an ideal time for a true policy innovation.
The Trump Administration has shown willingness to challenge conventional wisdom in economic policy. Oil shock therapy represents exactly the kind of creative disruption that could break the current stalemate, forcing adversaries to the negotiating table by targeting their Achilles heel of addiction to petroleum exports.
The views expressed are those of the author and do not reflect the official position of the United States Military Academy, Department of the Army, or Department of Defense.
- Maggie Haberman and Eric Schmitt, “Trump’s Frustration with Putin Preceded Resumption of U.S. Weapons to Ukraine,” New York Times, July 8, 2025. ↩︎
- Grant Smith, “OPEC+ Prepares Third Dose of Oil Shock Therapy,” Bloomberg, May 29, 2025. ↩︎
- “Russia finds it challenging to keep the lid on oil output, analysts, sources say,” Reuters, May 23, 2025. ↩︎
- “OPEC+ would struggle to cover major Iranian oil supply disruption,” Reuters, last modified June 13, 2025. ↩︎
- Diana Roy and Amelia Cheatham, “Venezuela: The Rise and Fall of a Petrostate,” Council on Foreign Relations, last modified November 30, 2018. ↩︎
- Sushant Singh, “How Vulnerable Is India to Chinese Economic Coercion?,” United States Institute of Peace, last modified June 16, 2025; Akira Davis, “Japan’s Debt Now Twice the Size of Its Economy,” New York Times, last modified May 28, 2025. ↩︎
- Charles Wilson, Profit and Power: A Study of England and the Dutch Wars (Netherlands: Springer Netherlands, 2012). Wilson makes a compelling argument that the Dutch brought about the disastrous 17th century Anglo-Dutch wars by outcompeting the English in shipping and imports. ↩︎