Moscow (AFP) – The United States has eased some restrictions on Russia’s oil sales as it tries to stabilize global energy markets, which have been upended by Iran blocking the Strait of Hormuz amid the ongoing war in the Middle East. The question arises: will the US sanctions waiver deliver a major windfall for Moscow?
The US waiver allows countries to buy Russian oil that is currently at sea until April 11. Given the short-term nature and technical limitations, it will not provide a huge immediate windfall to Russia; nonetheless, it still benefits Moscow, according to Kpler analyst Muyu Xu. “The measure mainly allows Russian barrels already in transit to complete voyages and discharge,” she said in a note, calling it a “wind-down, not reopening.”
Announcing the sanctions relief, US Treasury Secretary Scott Bessent stated that the move would not provide “significant financial benefit to the Russian government, which derives the majority of its energy revenue from taxes assessed at the point of extraction.” Kpler suggests that around 120 million barrels of Russian crude may currently be at sea, representing approximately two weeks of Russia’s total oil output. However, Muyu Xu from Kpler noted that most of that had already been pre-ordered by Chinese or Indian clients, limiting the immediate bump in orders.
Washington had last week given a similar waiver to New Delhi, which “gave Indian refiners a big advantage to snap up the cargo,” Xu added. The waiver may carry more symbolic than financial weight for Moscow. “It’s a gift to Russia in terms of sanctions,” remarked Richard Meade, editor-in-chief of Lloyd’s List Intelligence, a maritime data company. Media reports suggested that Japan, Thailand, and the Philippines were considering buying Russian crude following the US decision. However, Kpler’s Muyu Xu cautioned that some countries might still have concerns as the EU and UK sanctions remain in place. “It’s not crystal clear that everybody is free to buy … It’s not as easy as Trump just opened the tap and then the oil will naturally flow to the rest of the world.”
The Kremlin welcomed the decision and urged the United States to go further, with economic envoy Kirill Dmitriev stating that the lifting of more sanctions looked “inevitable” due to the volatility of the global energy market. Earlier this week, Russian President Vladimir Putin offered to supply oil to Europe should it reverse its stance on sanctions, but only on a “long-term” basis and “free from political pressure.”
Beyond the US waiver, the general surge in oil prices since the start of the war in the Middle East has helped replenish Russia’s coffers, which have been depleted by more than four years of war against Ukraine and international sanctions. Russia’s ESPO blend, typically purchased by China and India, is now trading $30-40 higher per barrel than before the conflict. According to Sergey Vakulenko from the Carnegie Endowment, every extra $10 per barrel brings an additional $1.6 billion a month in tax revenues for the Russian government. If prices rose by $40 and held that level for six months, this could mean an extra $38 billion, he calculated in a post on Telegram. This amount would be sufficient to cover most of Russia’s projected $50 billion deficit for 2025. Russia has posted a budget deficit every year since it ordered troops into Ukraine and expects to continue doing so in 2026. Oil-and-gas revenues — accounting for roughly one-fifth of Russia’s state income — were running at a five-year low at the start of the year due to sanctions, production issues, and Ukrainian attacks on energy facilities. The measures aimed at widening supply to push down prices are a “godsend for Russia’s shadow fleet,” according to Lloyd’s analyst Bridget Diakun, referring to the opaque sanctions-busting tankers used by Russia. “Russia can make a lot of money because it’s given a pass,” she added during a webinar.
The US sanctions relief has drawn an outcry from both Ukraine and Europe. Ukrainian President Volodymyr Zelensky stated that this move “certainly does not help peace.” Europe, which has not eased its sanctions on Russian oil, also expressed its discontent. French President Emmanuel Macron remarked that the shutdown of the Strait of Hormuz “in no way” justified lifting the sanctions on Russia. Britain stated that “all partners should maintain pressure on Russia and its war chest,” while German Chancellor Friedrich Merz remarked that “easing sanctions now, for whatever reason, is wrong.”
© 2024 AFP
