The US Treasury has granted a 30-day general licence allowing purchases of Russian seaborne oil, according to Treasury Secretary Scott Bessent. This measure aims to assist “energy-vulnerable” countries facing disruptions in Gulf oil supplies, a situation linked to the US-Israeli conflict with Iran and the closure of the Strait of Hormuz. The licence, which follows the lapse of a previous waiver, permits temporary access to stranded Russian oil and petroleum products without violating sanctions on Russian oil majors.
Waiver Extended Amid Supply Concerns
Bessent confirmed the extension in a social media post, stating the move would “stabilise the physical crude market” and ensure oil reaches nations most in need. The decision comes after a source familiar with the Treasury’s thinking told the outlet that vulnerable countries had requested the second waiver extension. These nations, unable to secure Gulf oil shipments, face energy shortages exacerbated by regional tensions.
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The general licence allows rerouting of existing oil supplies to countries competing with China for previously sanctioned Russian crude. This marks the second time the Treasury has allowed a waiver to lapse and then renew it. The initial waiver, issued in March, aimed to ease supply shortages caused by US-Israeli attacks on Iran, which had triggered concerns over oil prices.
Despite the waivers, oil prices have remained largely unaffected. However, India, one of Russia’s largest buyers of crude before sanctions, has continued purchasing Russian oil regardless of the lapsed waiver. The country has expressed confidence in managing supply disruptions, even as the US and its allies pressure Moscow over its actions in Ukraine.
Market Volatility and Unconfirmed Reports
On Monday, benchmark Brent crude futures rose about 1.5% to around $111 a barrel, driven by fears of tight supply. The Strait of Hormuz remains closed, complicating shipping routes. Earlier in the day, a report from an Iranian news agency suggested the US might temporarily lift sanctions on Iranian oil during peace talks. However, the outlet later refuted the claim, citing a US official. Reporters have not independently confirmed the report.
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Bessent, currently in Paris for a G7 finance leaders’ meeting, has urged allies to enforce Iran sanctions. The Treasury’s actions reflect a balancing act: maintaining pressure on Russia while addressing energy needs in regions destabilized by geopolitical conflicts. The 30-day licence offers a temporary fix but does not resolve underlying issues in global oil markets.
India’s continued reliance on Russian oil highlights the complexity of energy diplomacy. While the US seeks to isolate Russia economically, nations like India prioritize securing affordable fuel amid global supply chain disruptions. This dynamic underscores the limitations of sanctions in fully curbing trade flows when alternative markets exist.
Strategic Rerouting and Market Impact
The general licence enables the movement of stranded Russian oil through alternative channels, potentially reducing price volatility. However, the measure does not address the root causes of supply shortages, such as the closure of key shipping lanes or the broader geopolitical instability in the Middle East. Analysts note that the waiver’s impact on global markets remains limited, as major economies adjust to long-term shifts in energy sourcing.
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The US Treasury’s approach reflects a pragmatic response to immediate crises, even as it maintains a stance against Russian energy exports. By allowing limited access to sanctioned oil, the US aims to prevent further market shocks without fully lifting restrictions. This strategy may provide short-term relief but risks complicating efforts to isolate Russia economically.
As the 30-day licence expires, the Treasury will likely reassess the situation. The decision to renew or extend the waiver will depend on ongoing geopolitical developments, particularly the status of the Strait of Hormuz and the broader US-Israeli-Iran conflict. For now, the measure serves as a stopgap, offering temporary stability in a volatile market.
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