Trump announces deal right after call with Putin

Sanctions on Russian diesel waived for 6 months

Russian President Vladimir Putin and US President Donald Trump [AP]
Russian President Vladimir Putin and US President Donald Trump [AP]

Donald Trump announced Friday (local time) that he had reached an agreement with Vladimir Putin to supply Russian diesel to the United States and global markets, shortly after a phone call with the Russian president. The US Treasury Department issued a temporary sanctions waiver the same day, allowing Russian diesel transactions through April 7 next year. The specific supply volumes appeared only in Trump's announcement, however — the Kremlin offered no figures of its own.

Trump wrote on Truth Social that Russia had agreed to immediately supply more than 300,000 metric tons of diesel to the US and world markets, with an additional 500,000 metric tons in November and another 1 million metric tons shortly after. He added that a further 3 million metric tons could follow depending on the condition of Russian refining facilities, bringing the potential total to more than 4.8 million metric tons.

Trump said the deal, combined with what he described as the United States' "full control" of the Strait of Hormuz, would quickly drive down diesel prices in the US and globally. He emphasized that lowering prices for farmers, ranchers and truck drivers was his top priority.

The Kremlin, however, did not specify delivery timelines or volumes. According to the Kremlin, Putin told Trump during the call that "Russia is ready to supply oil and petroleum products to the US and world markets."

Russian Deputy Prime Minister Alexander Novak told the TASS news agency that Russia had begun lifting its diesel export restrictions ahead of schedule, effective immediately. He said supplies to the United States could begin as early as this month and that domestic inventories were sufficient.

The US Treasury's Office of Foreign Assets Control issued a temporary general license permitting the sale, delivery, offloading and import of Russian diesel through 12:01 a.m. Eastern time on April 7 next year, including imports into the United States. All other sanctions on Russia remain in place, and transactions involving accounts linked to the Russian central bank, sovereign wealth fund or finance ministry are excluded from the license.

The United States has banned imports of Russian crude oil, petroleum products, LNG and coal under an executive order issued in March 2022. The new license opens only diesel transactions, and only on a temporary basis.

The move appears driven by surging diesel prices. According to Reuters, the average US diesel price stood at $6.28 per gallon as of Thursday, up 70 percent since the United States and Israel launched a war against Iran on Feb. 28. Prices hit a record high above $6.50 per gallon in late September. The United States faces midterm elections on Nov. 3.

Supply disruptions from Russia have also pushed prices higher. Russia banned diesel exports by producers on July 8 after Ukrainian drone strikes on refining facilities worsened domestic fuel shortages; the ban has since been extended three times and was set to remain in place through Oct. 31.

Easing the sanctions was also something Russia had been seeking. Putin said Wednesday that Russia had ample diesel but could not supply world markets because of sanctions. Reuters, citing sources, reported that Putin's envoy Kirill Dmitriev had visited Washington last month and asked US officials to issue export licenses covering all major Russian oil companies for diesel sales to the United States.

Markets responded to the US-Russia deal. Reuters reported that US diesel futures fell nearly 5 percent immediately after the announcement, trading at $4.64 per gallon. Analysts, however, said the volumes were too small to meaningfully push prices down. The initial 300,000-metric-ton tranche amounts to roughly 2.25 million barrels. CNN noted that Ukrainian drone strikes had removed about 800,000 barrels per day from the market, and that even combining the October and November tranches of 800,000 metric tons would cover only about a day and a half of US demand. Commodities analyst Rory Johnston dismissed the deal as "an announcement without substance."

Dan Pickering, chief investment officer at Pickering Energy Partners, told CNN he expected supply to increase by at most 5 to 6 percent by year-end — helpful, he said, but not enough to reshape the global diesel market.

Whether Russia can deliver on its pledges also remains uncertain. The Federal Reserve Bank of Dallas said in a report Thursday that Ukrainian strikes had cut Russian refining capacity by as much as 60 percent over the summer. Ukraine claims it struck four Russian refineries this week alone.

Ukraine pushed back sharply. President Volodymyr Zelensky wrote on X that "gifts to Putin do not bring peace." He said Ukraine had proposed a reciprocal arrangement to the United States: Ukraine would stop striking Russian refineries if Russia stopped destroying Ukrainian energy facilities. The announcement came as a Ukrainian delegation was in Miami holding end-of-war negotiations with US envoy Steve Witkoff and Jared Kushner.

Criticism also emerged in the US Congress. Sen. Richard Blumenthal (D), a co-sponsor of Russia sanctions legislation, said the deal contradicted the intent of Congress. Rep. Don Bacon (R) said now was the time to tighten the financial screws on Putin's war machine, not loosen sanctions. Sens. Jeanne Shaheen, Chuck Schumer and Elizabeth Warren issued a joint statement condemning the move as a betrayal of Ukraine and European allies. Trump had signed a bill targeting Russia's energy sector into law last month.


shee@heraldcorp.com