US eases oil sanctions on Russia to curb spiking fuel prices

The Trump administration Mar. 12 lifted sanctions on Russian oil already at sea in an effort to control surging fuel prices after US and Israeli military strikes on Iran halted shipping through the Strait of Hormuz, lifting crude prices to over $100/bbl. 

General License 134, issued by the US Treasury’s Office of Foreign Assets Control (OFAC), authorizes the delivery and sale of Russian crude oil and petroleum projects until midnight Eastern Time Apr. 11, provided the vessels were loaded on or before Mar. 12.

The waiver applies to all vessels, including the “shadow fleet,” a clandestine network of aging oil tankers used by Russia to transport crude and products primarily to Asia, as a way to bypass international sanctions and G7 price caps imposed on Moscow after its 2022 invasion of Ukraine.

Europe and Ukraine condemned the move, with German Chancellor Friedrich Merz saying that easing the sanctions sent the wrong signal. European Commission President Ursula von der Leyen added: “This is not the moment to relax sanctions on Russia.”

But Treasury Secretary Scott Bessent, writing on X, said the “narrowly tailored, short-term measure applies only to oil already in transit and 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.” He, like President Trump, called surging crude prices a “short-term and temporary disruption that will result in a massive benefit to our nation and economy in the long term.”

Related measures to counter oil supply disruption

The move marks the second easing of sanctions on Russia in just a week. On Mar. 5, the US Treasury issued a 30-day waiver allowing India to buy Russian oil stuck at sea.

The latest sanctions relief comes on the heels of an International Energy Agency effort to draw down 400 million bbl of government strategic petroleum reserve to counter what it called the largest oil supply disruption in history.

The US said it would release 172 million barrels of oil—1.4 million b/d over 120 days—from the Strategic Petroleum Reserve starting next week as part of that effort.

Independent research firm ClearView Energy Partners LLC said that the sanctions waiver on Russia could provide a swift respite to the market, unlike the emergency petroleum reserve drawdowns that could take weeks to arrive.

“To some extent, US reliance on Russia sanctions relief to shore up supply for Hormuz-reliant Asian importers—one day after the largest drawdown in IEA history, no less—would appear to underscore both the direness of current market conditions and the limitations associated with government strategic reserves,” ClearView Energy said in a Mar. 13 client note.

“Notwithstanding benefits to the Kremlin, Russian barrels stranded at sea, like (above-board) volumes already in transit and producers’ forward-positioned commercial inventories, can reach importers quickly,” it added.

In other moves to contain prices, the White House on Mar. 11 ordered the US International Development Finance Corp. (IDFC) to provide $20 billion in political risk insurance and financial guarantees for maritime trade in the Gulf. Chubb will act as the lead underwriter issuing policies for eligible vessels, IDFC noted in a statement.

The ​Trump administration also is mulling a temporary waiver of the 1920 maritime law that prevents foreign-flagged vessels from transporting goods between US ports to ease prices.

“In the interest of national defense, the White House is considering waiving the Jones Act for a limited period of time to ensure vital energy products and agricultural necessities are flowing freely to US ports,” press secretary Karoline Leavitt said in a statement.

The Cato Institute, a libertarian think tank, said a Jones Act waiver would not produce “dramatic drops” in fuel costs because “transportation is just one of many factors that determine prices at the pump, and the current price environment reflects global supply disruptions that no domestic shipping policy can fully offset.”

But, it said, it is “equally wrong to claim a waiver would do nothing. There is no question about the directional impact of Jones Act relief, only the magnitude,” Cato said in a blog post.