4 hours ago
6
Archie MitchellBusiness reporter
Getty Images
The Trump administration's decision to ease sanctions on countries buying Russian oil has been welcomed by the Kremlin and has sparked deep concern among pro-Ukraine campaigners.
The US waiver, active for one month, will let countries buy up Russian oil which, under current sanctions, has been floating at sea, unable to be sold.
Treasury Secretary Scott Bessent said the "tailored, short-term" policy move would reduce the economic impact of the US-Israel war with Iran.
But Bill Browder, a sanctions campaigner and leading critic of Putin's regime, told the BBC the move was "a terrible decision that will enrich Vladimir Putin and prolong the war in Ukraine".
The new policy marks a sharp about-turn for US policy.
Previously Washington came down hard on countries purchasing Russian oil, slapping a huge 50% tariff on imports from India in August, over allegations the country was buying Russian oil, and thereby helping to finance the war in Ukraine.
As a result, much of the sanctioned oil was left on tankers off the coast of India and other Asian countries, with traders searching for buyers willing to take it.
Putin's economic envoy, Kirill Dmitriev, said the move showed Russia was integral to the stability of the global energy market and that the further loosening of sanctions was "inevitable".
Bessent has insisted that Russia will only see a limited financial boost from the sale of the oil, while the move addressed the "instability posed by the terrorist Iranian regime".
However, Benjamin Hilgenstock, head of macroeconomic research and strategy at the Kyiv School of Economics, argued the move was "a serious bailout" for Putin's regime.
He estimated monthly Russian oil exports could be boosted by around $10bn (£7.5bn), with half of this being paid in tax straight into the government's coffers.
If the crisis in Iran were to last only a month or two, the impact would be limited, but if it lasted much longer it would put Russia "back in quite a comfortable situation", he said.
The Centre for Research on Energy and Clean Air (CREA) puts a much lower estimate on the amount of oil Russia could sell under the waiver.
But the Finnish research organisation says the move would still allow Russia to clear some stocks, and boost production.
Russia had been forced to slow down its oil production due to storage constraints, CREA energy analyst Isaac Levi said.
Will it take the pressure off the oil price?
Allowing more Russian oil onto the market could help ease the upward pressure on the oil price.
But Warren Patterson, head of commodities strategy at Dutch bank ING, said the US move would "only scratch the surface" of the supply disruption in the Persian Gulf.
CREA estimates Russia has around 50m barrels of oil at sea it can now sell under the waiver.
Russia has said it has double that amount of oil at sea, or 100m barrels, but still less than a single day's global demand for oil, at 104m barrels.
"There is only one solution for the oil market and that is getting oil flowing through the Strait of Hormuz," Patterson said.
Patterson said the countries most likely to buy up the newly-available Russian oil would be India and other Asian countries who have been most affected by the closure of the strait.
Around a fifth of oil traded globally passes through the Strait of Hormuz in normal times. That trade has hit a virtual standstill, reducing the supply of oil on the global market, raising fears that disruption may go on for some time, and pushing the price up sharply.
In turn that has worried politicians who see a renewed threat to inflation through higher energy costs.
Hilgenstock said the crisis in the Strait of Hormuz had pushed the West's anti-Russian sanctions regime beyond its limits.
Sanctions against Russia relied on the global oil market being able to work around the hit to overall oil supplies, he said.
"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."
While the overall impact from the US move may not prove significant, pro-Ukraine campaigners have said it marks a symbolic shift in the Western consensus away from applying maximum pressure on Russia.
Alexander Kirk, sanctions campaigner at human rights group Urgewald, said the message to the Kremlin is "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 added.
Bill Browder said he hoped that other governments would not follow in the US's footsteps.
"It makes no sense whatsoever to lift sanctions. The Chinese, Indians and Turks have been buying all of Russia's oil all along," he said.
"The only thing lifting sanctions does is puts more money in Putin's pockets and less in these countries'."
Britain, Canada and Germany have spoken out against the easing of sanctions, with UK energy minister Michael Shanks suggesting Putin would see it as "a chance to invest in the war machine".
German Chancellor Friedrich Merz said six out of seven G7 leaders believed anti-Russian sanctions should remain in place.
Hilgenstock said the crisis in the Strait of Hormuz was, from the perspective of Russia policy, akin to an "act of God" that had pushed the West's anti-Russian sanctions regime beyond its limits.
Sanctions against Russia relied on the global oil market being able to work around the hit to overall oil supplies, he said.
"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."
