Trump administration allows for Russian oil sales as energy prices soar
The Trump administration on Thursday night temporarily lifted sanctions on Russian oil shipments in an effort to calm markets and stem the economic fallout from its war on Iran, which has sent crude prices spiraling upward.
A general license issued by the Treasury Department allows Russia to begin selling some 128 million barrels of oil that are estimated to have already been loaded onto tankers previously facing restrictions from the United States. The license expires after 30 days.
“To increase the global reach of existing supply, @USTreasury is providing a temporary authorization to permit countries to purchase Russian oil currently stranded at sea,” Treasury Secretary Scott Bessent posted Thursday night on X. “The temporary increase in oil prices is a short-term and temporary disruption that will result in a massive benefit to our nation and economy in the long-term.”
On Thursday, futures for Brent crude oil closed at just above $100 a barrel for the first time since 2022.
The move will provide a huge financial boost to Russia, which experts say has already been receiving about $150 million per day from increased oil sales since the U.S. attacked Iran two weeks ago.
It immediately drew rebuke from congressional Democrats, who had already attacked the administration for easing sanctions on Russian oil that earlier this month had only allowed sales only to India. The latest license is far more expansive, permitting sales anywhere in the world.
“As [Russian President Vladimir] Putin helps Iran target Americans in the Middle East, @POTUS is now filling the Kremlin’s war coffers,” Sen. Jeanne Shaheen (D-New Hampshire), the top Democrat on the Foreign Relations Committee, posted on X on Thursday night. “Instead of squeezing Russia’s faltering economy, the President’s ill-planned war is giving Putin a windfall while American families face higher prices.”
The lifting of the sanctions positions Putin as one of the biggest beneficiaries of President Donald Trump’s war on Iran. Sanctions were imposed on Russian oil in response to the country’s 2022 invasion of Ukraine, part of an effort by the U.S. and the European Union to pressure Russia to withdraw its forces as NATO countries invested heavily in helping Ukraine repel the invasion.
On Friday, Kremlin spokesman Dmitry Peskov said the attempt to stabilize energy markets had seen U.S. and Russian “interests coincide,” while European leaders appeared skeptical. “Without significant volumes of Russian oil, stabilization of the market is impossible,” Peskov said.
Ukrainian President Volodymyr Zelensky said the U.S. decision “will strengthen Russia’s position” and provide more money for weapons. “Lifting sanctions only to have more drones flying at you is, in my view, not the right decision,” he said.
European Council President António Costa described the U.S. decision as “very concerning” in a post on X on Friday. “Weakening sanctions increases Russian resources to wage the war of aggression against Ukraine,” he said.
German Chancellor Friedrich Merz also questioned the U.S. motive and objectives in Iran in a speech Friday. “When does this war end, and with which strategy this war is brought to an end? These questions are actually not being answered,” he said.
The Trump administration said the lifting of sanctions is narrowly tailored in a way to avoid giving Russia a windfall. Bessent wrote on X that the license to deliver oil already on ships “will not provide significant financial benefit to the Russian government” because it “derives the majority of its energy revenue from taxes assessed at the point of extraction.”
But analysts say the potential for Russian profit is far more extensive, noting that the license will free up vessels in the dark fleet that are currently bottlenecked by sanctions, enabling them to make deliveries and refill with more Russian fuel. The sales will further enable Russia to sell cargo that was otherwise stranded, providing income for its war in Ukraine.
Another beneficiary could be Iran, experts say, because its government and independent militias probably own many of the tankers that make up a “shadow fleet” of hundreds of vessels currently holding Russian oil. This fleet is designed specifically to evade sanctions. It is made up of older, less reliable vessels that sailed uninsured and used radar-jamming devices and other techniques to avoid detection.
Now, the U.S. government has granted them legitimacy - for at least 30 days.
“This just underscores how Russia is the biggest winner in this conflict,” said Brett Erickson, managing principal at Obsidian Risk Advisors, a consultancy that specializes in financial crime and regulatory issues. “It shows we were really not prepared for this war. We underestimated the length the Iranians were willing to go with the Strait of Hormuz.”
That narrow strait, which connects the Persian Gulf to the Gulf of Oman and the Arabian Sea, is a choke point for about one-fifth of the world’s oil supply. Shipping traffic through it has been effectively halted since the start of the war, as Iran attacks vessels that attempt to sail through. Shipping companies have ordered their tankers in the area idled, and the U.S. has been unable to secure the strait, despite assurances that it would provide risk insurance and possibly even provide military escorts at some point in the future.
With no sign that the strait will be safe for shipping traffic anytime soon, oil prices have continued to rise. They have already reached the point where they are likely to push the average cost of a gallon of gasoline past $4 in the U.S. Diesel prices in some states have soared more than $1 in the past week.
The longer the strait stays closed, the larger the economic fallout. Gulf State oil companies are already being forced to ramp down operations, as they are running out of places to store the oil they pump. Once facilities are shut down completely, it can take weeks to get them back up and running.
Despite Trump declaring the war on Iran has effectively been won by the U.S., it has not been able to get the strait reopened for business. Iran has started laying sea mines and is threatening to continue its attacks. Administration officials have acknowledged that the military ships Trump had suggested could be available to escort tankers are unavailable because they are being used in battle. And experts question whether escorting the ships that normally sail through the strait is logistically feasible or financially viable.
Adding to the challenge are the complexities of drone warfare. Iran’s relatively inexpensive drones can inflict relentless damage on tankers and energy infrastructure in the region, despite the massive U.S. military presence in the area.
In a press briefing Friday Defense Secretary Pete Hegseth disputed reporting that administration officials had underestimated the war’s likely impact on the Strait of Hormuz, saying Iran “always” tries to hold the waterway “hostage.”
“As the world is seeing, they are exercising sheer desperation in the Straits of Hormuz,” Hegseth said. “It’s something we’re dealing with; we have been dealing with it. Don’t need to worry about it.”
Hegseth later added that U.S. officials have “heard them talk about” placing new mines in the strait, “but we have no clear evidence” that Iran has done so.
But Gen. Dan Caine, chairman of the Joint Chiefs of Staff, acknowledged during the briefing that “Iran still has the capability to harm friendly forces and commercial shipping.”
“They are the belligerents here holding the straits closed, although there is some traffic moving through there,” Caine said. “We’ve made it a priority to target Iran’s mine-laying enterprise.”
It has all sent global energy markets into turmoil, with no sign of calming. “The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” the International Energy Agency said in a report Thursday.
Some oil and sanctions experts have questioned how much Russian oil can actually be delivered within the next 30 days. The process involves complicated banking and insurance transactions, leading to speculation that the 30-day license could be renewed, perhaps multiple times if oil prices remain high.
“I just saw it as a political signaling to the market. It’s not going to have any sustained effect unless they extend it within the next 30 days, which they probably will,” said one expert, who spoke on the condition of anonymity out of fear of retaliation.
The U.S. and its allies have few remaining tools to keep oil prices from surging as the strait remains cut off. On Wednesday, they approved a historic release of oil from emergency reserves, including 172 million barrels from the U.S. Strategic Petroleum Reserve. But the release will backfill only a fraction of the oil that typically moves through the strait. Prices have continued to push upward since the release was announced.