*

Trump confirms Budapest summit with Putin is off

*

Demands immediate ceasefire in Ukraine

*

Sanctions Russia's two biggest oil majors

*

US Treasury says it is targeting 'Kremlin's war machine'

Moscow says sanctions 'counterproductive' to finding peace

By Andrew Osborn, Jeff Mason and Timothy Gardner

MOSCOW, Oct 23 (Reuters) - U.S. President Donald Trump

hit Russia's two biggest oil companies with sanctions in his

latest sharp policy shift on Moscow's war in Ukraine, prompting

global oil prices to rise by 3% on Thursday and India to

consider cutting Russian imports.

The sanctions, unveiled by the U.S. Treasury, target oil

companies Rosneft and Lukoil, and mark a dramatic U-turn by

Trump, who said only last week that he and Russian President

Vladimir Putin would hold a summit in Budapest to try to end the

war in Ukraine.

But in his latest turnaround on the conflict, Trump said on

Wednesday the planned summit was off because he did not believe

it would achieve the outcome he wanted and complained that his

many "good conversations" with Putin did not "go anywhere".

"We cancelled the meeting with President Putin - it just

didn't feel right to me," Trump told reporters at the White

House. "It didn't feel like we were going to get to the place we

have to get. So I cancelled it, but we'll do it in the future."

TARGETING ABILITY TO FUND WAR

Scott Bessent, the U.S. Treasury Secretary, made clear

Washington stood ready to take further action and was targeting

Russia's ability to fund a war it launched in February 2022.

"Given President Putin's refusal to end this senseless war,

Treasury is sanctioning Russia's two largest oil companies that

fund the Kremlin's war machine," Bessent said in a statement.

"We encourage our allies to join us in and adhere to these

sanctions."

Russia's Foreign Ministry called the U.S. sanctions

"counterproductive" when it came to finding a peace deal and

said its goals in Ukraine remained unchanged.

Oil and gas revenue, which is currently down by 21%

year-on-year, accounts for around one quarter of Russia's budget

and is the most important source of cash for Moscow's war in

Ukraine, now in its fourth year.

However, Moscow's main revenue source comes from taxing

output, not exports, which is likely to soften the immediate

impact of the sanctions on state finances.

IMPACT ON GLOBAL OIL PRICES

Ukrainian President Volodymyr Zelenskiy thanked the

United States for the new sanctions, saying they were "very

important" but that more pressure would be needed on Moscow.

Oil prices jumped more than 3% on Thursday amid worries that

the sanctions would disrupt global supply. Indian oil industry

sources told Reuters that Indian refiners were poised to sharply

curtail imports of Russian oil to ensure they were in compliance

with U.S. sanctions.

India has become the biggest buyer of seaborne Russian oil

sold at a discount after Western nations shunned purchases and

imposed sanctions on Moscow following the 2022 invasion of

Ukraine.

The U.S. Treasury has given companies until November 21 to

wind down their transactions with the Russian oil producers.

Some analysts say that the new sanctions could force Russia

to further discount its oil on world markets to offset the

perceived risk of U.S. secondary sanctions, but that pain could

in turn be mitigated if global oil prices rise supporting the

state's finances and the rouble.

SHIFTING POSITION ON CEASEFIRE

After an August summit with Putin in Alaska, Trump dropped

his demand for an immediate ceasefire in Ukraine and embraced

Moscow's preferred option of going straight to negotiating an

overall peace settlement.

But in recent days he has reverted to the idea of an

immediate ceasefire, something that Kyiv supports but which

Moscow, whose forces are steadily edging forward on the

battlefield, has repeatedly made clear it has no interest in.

Russia has said it opposes a ceasefire because it believes

it would only be a temporary pause before fighting resumes,

giving Ukraine time and space to re-arm at a time when Moscow

says it has the initiative on the battlefield.

In a show of force on Wednesday, Moscow conducted a major

training exercise involving nuclear weapons.

Russia argues that negotiating a full peace settlement that

paves the way for what it calls a "long-lasting peace" is

therefore a better option.

But Kyiv has said that Russia's conditions for a settlement

- which would entail Ukraine handing over more land - were

unacceptable and, in effect, a demand for it to surrender.