US Extends Sanctions Waiver on Russian Oil to Support Vulnerable Countries
US Treasury's Decision and Global Energy Implications
By David Lawder
Sanctions Waiver Extension Announced
PARIS, May 18 (Reuters) - U.S. Treasury Secretary Scott Bessent on Monday announced another 30-day extension of a sanctions waiver allowing purchases of Russian seaborne oil to aid "energy-vulnerable" countries hit by the Iran war, reversing plans not to grant an extension.
Bessent said in a posting on X that the Treasury was issuing the 30-day general license after a previous waiver lapsed on Saturday. This will allow temporary access to Russian oil and petroleum products stranded on tankers without violating severe U.S. sanctions on Russian oil majors, he said.
Support for Vulnerable Countries
A source familiar with the decision had told Reuters that the second waiver extension was requested by poor and vulnerable countries that cannot get Gulf oil shipments due to the U.S.-Israeli war with Iran and the closure of the Strait of Hormuz.
"This extension will provide additional flexibility, and we will work with these nations to provide specific licenses as needed," Bessent said. "This general license will help stabilize the physical crude market and ensure oil reaches the most energy-vulnerable countries."
Policy Reversal and Rationale
Bessent, who last month told the Associated Press that no further extension of the Russian oil sanctions waiver was planned, on Monday argued that the measure would help reroute existing supply to countries most in need, allowing them to compete with China for previously sanctioned oil.
The action marks the second time the Treasury has allowed the sanctions waiver to lapse and subsequently extended it.
Political Reactions
Two senior Democratic senators, Jeanne Shaheen of New Hampshire, and Elizabeth Warren of Massachusetts, blasted the move as an "indefensible gift" to Russian President Vladimir Putin.
"Every additional dollar the Kremlin earns from this license helps Putin finance his illegal war against Ukraine and kill innocent Ukrainians," they said in a statement. They said the U.S. sanctions relief was also not driving down gasoline prices at home or stabilizing global energy markets.
Background: Sanctions and Oil Market Dynamics
Sanctions on Russian Oil Majors
The Trump administration last year slapped sanctions on Russian oil majors Rosneft and Lukoil to pressure Russia to end its war in Ukraine by depriving vital oil revenues to Moscow.
Temporary Licenses and Market Impact
But after U.S.-Israeli attacks on Iran drove up global oil prices, the Treasury first issued the temporary license in March in an attempt to ease oil supply shortages and mitigate price spikes by releasing sanctioned Russian oil and petroleum products stranded in tankers. The waivers do not apply to oil now being pumped by Russia.
Market Analysis and Limitations
Limited Impact on Gasoline Prices
LIMITED IMPACT
Analysts said the short-term waivers may help some individual countries dependent on Gulf oil supplies, but would do little to drive down U.S. gasoline prices, a key goal of the Trump administration.
"It is not yet clear whether these short-term authorizations have had any meaningful impact on U.S. gasoline prices," said Stephanie Connor, a former policy director at the Treasury's Office of Foreign Assets Control and now a partner with Holland & Knight. She noted that British and European sanctions on Russian oil purchases remain in place.
Scope of the Waiver
As in the previous waiver, the license allowed purchases of Russian crude and petroleum products loaded on vessels as of April 17, limiting the volume of the sales and not allowing access to Russian oil that had been more recently loaded.
Effects on Russian Revenues and Infrastructure
Charles Lichfield, deputy director of the Atlantic Council's GeoEconomics Center, said that the waivers would boost Russia's oil revenues, already bolstered by higher oil prices, while offsetting the impact of increased Ukrainian strikes on Russian oil refineries and other infrastructure.
"Given the information coming out of the Russian economy that looks bad, this might be the time to really hit them with sanctions," Lichfield said. "But I don't see (that) the administration has come to that conclusion."
Oil Price Movements and Geopolitical Developments
Brent Oil Futures and Strait of Hormuz
On Monday, benchmark Brent oil futures prices rose about 2.6% to close above $112 per barrel due to growing concerns of tight supply with the Strait of Hormuz still closed.
Rumors of Sanctions Relief on Iranian Oil
Crude fell earlier in the session on a report from an Iranian news agency that the U.S. was considering temporarily lifting sanctions on Iranian oil during peace talks, but CNBC later reported that report was false, citing a U.S. official. Reuters has not independently verified that report.
Trump later said he paused a planned attack on Iran to allow negotiations to continue.
International Cooperation and Enforcement
Calls for Stronger Sanctions Enforcement
Bessent, who is in Paris for a Group of Seven finance leaders meeting, said that he wanted G7 and other allies to enforce Iran sanctions more strongly.
"We call upon all our G7 and indeed all of our allies and the rest of the world to follow the sanctions regime, so that we can crack down on the illicit finance that is fueling the Iranian war machine and give this money back to the Iranian people," Bessent told reporters.
(Reporting by David Lawder in Paris; additional reporting by Andrea Shalal and Timothy Gardner in Washington; Writing by David Lawder and Makini Brice; Editing by Aidan Lewis and Mark Porter)
