The decision by the Trump administration to relax sanctions on nations purchasing Russian oil has drawn praise from the Kremlin. However, it has also ignited significant apprehension among supporters of Ukraine.
This US waiver, effective for a single month, will permit countries to acquire Russian oil that, under prevailing sanctions, had been effectively stranded at sea, rendered unsaleable.
Secretary of the Treasury, Scott Bessent, described this as a “tailored, short-term” policy adjustment intended to mitigate the economic repercussions of the conflict between the US and Iran.
Conversely, Bill Browder, a dedicated sanctions campaigner and a prominent critic of Vladimir Putin’s administration, characterized the move to the BBC as a “terrible decision that will enrich Vladimir Putin and prolong the war in Ukraine.”
The waiver specifically applies to oil loaded onto vessels prior to Wednesday.
Up to this point, US sanctions had prohibited countries from engaging in such purchases. In August, Washington had levied a 50% tariff on imports from India, citing accusations that the nation was aiding in the financing of Putin’s conflict in Ukraine by acquiring Russian oil.
A substantial portion of this sanctioned oil remained on tankers off the coasts of India and other Asian nations, with traders actively seeking buyers willing to take on the commodity.
A Lifeline for Russia?
Russia’s economic envoy, Kirill Dmitriev, asserted that this development underscores Russia’s crucial role in maintaining stability within the global energy market, suggesting that further sanction relaxations are “inevitable.”
Bessent has maintained that Russia will experience only a modest financial uplift from the sale of this oil, emphasizing that the policy addresses the “instability posed by the terrorist Iranian regime.”
Yet, the BBC has received insights from experts who caution that Russia could, in fact, realize substantial financial gains even from a minor easing of these restrictions.
Benjamin Hilgenstock, who leads macroeconomic research and strategy at the Kyiv School of Economics, described the measure as “a serious bailout” for Putin’s government.
He estimated that this adjustment could result in a monthly increase of approximately $10 billion (£7.5 billion) in Russian oil exports, with half of this revenue flowing directly into government coffers as tax.
Economic pressures are mounting within Russia; oil exports in February reached their lowest point since Moscow’s full-scale invasion of Ukraine in 2022. Against this backdrop, Hilgenstock suggested the US decision would “help significantly.”
Should the crisis in Iran persist for only a month or two, the pressure on Russia would diminish. However, a prolonged situation would render Russia “back in quite a comfortable situation.”
Impact on Oil Prices
Concurrently, Hilgenstock noted that the move would offer only “marginal” assistance to global energy markets.
Warren Patterson, head of commodities strategy at the Dutch bank ING, concurred, indicating that the US action would “only scratch the surface” of the supply disruptions occurring in the Persian Gulf.
“There is only one solution for the oil market and that is getting oil flowing through the Strait of Hormuz,” he added.
Patterson identified India and other Asian nations, most affected by the strait’s closure, as the likely purchasers of this newly available Russian oil.
Under normal circumstances, approximately one-fifth of the world’s traded oil passes through the Strait of Hormuz. This trade has virtually halted, constricting the global oil supply, raising concerns about prolonged disruption, and sharply increasing prices.
This, in turn, has led to unease among policymakers who perceive a renewed threat of inflation due to escalating energy costs.
Has the West “Blinked”?
While the overall impact of the US decision may not prove substantial, pro-Ukraine campaigners argue it signals a symbolic shift in the Western consensus, moving away from applying maximum pressure on Russia.
Alexander Kirk, a sanctions campaigner with the human rights organization Urgewald, stated that the message conveyed to the Kremlin is essentially: “wait long enough and the West will blink.”
“Russia has already made billions from fossil fuel exports since the strikes on Iran began.”
“Allowing more Russian oil onto the market now only helps refill the Kremlin’s war chest,” he commented.
Amid concerns that other nations might follow the US in easing sanctions on Russia, Britain’s energy minister, Michael Shanks, affirmed that the UK would not do so.
“What we absolutely can’t have is Putin sitting in the Kremlin seeing this as a chance to invest in the war machine,” he told the BBC.
Regardless, the Centre for Research on Energy and Clean Air (CREA) suggests Putin will seize this opportunity to clear the tankers currently at sea and resume boosting Russia’s oil production.
CREA’s Russian energy analyst, Isaac Levi, explained that the country had been compelled to reduce its production due to storage limitations, a situation it can now reverse.
Hilgenstock posited that the crisis in the Strait of Hormuz, from the perspective of Russian policy, amounted to an “act of God” that had pushed the West’s anti-Russian sanctions regime beyond its capabilities.
Sanctions against Russia, he noted, depended on the global oil market’s capacity to absorb the impact on overall supplies.
“The challenge in the Strait of Hormuz is so massive, that ability is gone for now.”
“There is not much that we can do until it is over.”