Trump says Russia will supply diesel to US despite sanctions

US President Donald Trump said he had agreed with Russian President Vladimir Putin to release Russian diesel for the US and global markets. The announcement came as fuel prices surged ahead of US midterm elections.

Trump said more than 300,000 tonnes would be supplied immediately, followed by 500,000 tonnes in November and another 1 million tonnes later. He also cited a possible additional 3 million tonnes depending on the condition of Russia’s refineries.

The US Treasury said the Office of Foreign Assets Control was immediately issuing a temporary general license for Russian diesel supplies to the global market. The move comes despite sanctions imposed over Russia’s invasion of Ukraine.

Analysts question Russia’s capacity

Neil Atkinson, a former head of the International Energy Agency’s oil industry and markets division, said Russia would struggle to deliver the promised volumes in the short term without drawing down domestic supplies.

Russian diesel and gas-oil exports fell to 190,000 barrels per day in the third quarter, from 690,000 in the second quarter and 850,000 in the first, according to Windward analyst Michelle Wiese Bockmann. Russia banned diesel exports in July and extended the restriction through the end of October in September.

Russian officials said exports could be partly reopened if production exceeded domestic demand. Bockmann said Russia imported gasoline, diesel and gas oil for the first time in the third quarter as domestic shortages intensified.

Supply disruptions push prices higher

The US average diesel price reached a record $6.52 per gallon in September and now stands at $6.20, according to the American Automobile Association. US inventories have fallen sharply since the US-Israel war on Iran began and remain below normal levels.

Global supplies have also been disrupted by restrictions around the Strait of Hormuz, an attack on Saudi Arabia’s East-West Pipeline, Houthi attacks in the Red Sea and strikes on energy infrastructure in Russia and Ukraine.

Ukrainian President Volodymyr Zelenskyy called the agreement “a weak decision by strong partners” and said it benefited Russia. Trump said lower fuel prices were especially important for farmers, ranchers and truckers ahead of the November 3 elections.