New Delhi: US President Donald Trump’s decision to bring Russian diesel back into the American market has raised questions about Washington’s sanctions policy against Moscow and its efforts to curb revenues funding the war in Ukraine.
Trump’s decision comes ahead of the November mid-term elections, with diesel prices near record levels. Diesel is essential for trucking, agriculture and heating in the US, making higher fuel costs a concern for households and businesses.
The announcement on Friday came less than a month after Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, which provides for tariffs of up to 100 percent on goods from countries that continue to buy Russian oil and gas under specified conditions.
On 9 October, the US Treasury’s Office of Foreign Assets Control (OFAC) issued General License 135, temporarily authorising specified transactions involving Russian-origin diesel until 7 April 2027, allowing the proposed trade to proceed.
However, analysts are sceptical that the additional volumes will significantly ease global diesel shortages or bring down prices across markets.
Abu Dhabi-based commodity analyst Natalia Katona said the arrangement appeared to be directed at a specific regional market rather than the global diesel shortage. “The US Atlantic coast, particularly New York and the wider Northeast, has a persistent diesel shortfall because it lacks sufficient refining capacity.” .
Regular seaborne imports of around 200,000-300,000 barrels per day help meet that shortfall, Katona said.
“While many in the market argue that these volumes won’t solve the global diesel shortage, Trump is addressing a very specific local problem: diesel prices in the traditionally Democratic Northeast ahead of the elections,” she told ThePrint.
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Sanctions relief versus pressure on Russia
Trump’s move highlights the contrast between the US easing restrictions on its own proposed Russian diesel imports and threatening penalties against other major buyers of Russian energy.
America-based energy strategist and geopolitical analyst Umud Shokri said the arrangement was administratively permitted under the US licence, but actual deliveries would depend on available Russian supplies, export rules, shipping and payment arrangements. He also noted that some US lawmakers had questioned whether the move conflicted with federal law.
Russia’s own restrictions could pose another constraint. Moscow extended its diesel export ban for producers until 31 October, citing the need to stabilise domestic fuel supplies. Meanwhile, Ukrainian drone attacks continue to disrupt Russian refining capacity.
Despite restrictions on diesel exports, Russia continued supplying some foreign markets during the sanctions period through government-to-government arrangements which was exempt from its export ban, Katona said. These shipments included supplies to Mongolia, Kyrgyzstan and other Central Asian countries.
Shokri said there was no indication that Russian refineries returned to peak operating levels. In September, half of Russia’s six largest diesel-producing refineries had significantly reduced or halted output following drone damage, he said.
Under Trump’s supply arrangement, Russia is expected to ship 300,000 tonnes of diesel immediately, followed by 500,000 tonnes in November and one million tonnes in December, according to Katona.
These volumes would be equivalent to around 75,000 barrels per day (b/d), 125,000 b/d and 250,000 b/d, respectively, averaged over a month. The December shipment could cover almost all of the US Northeast’s regular diesel import requirement of 200,000-300,000 b/d.
However, high freight rates and a shortage of clean-product tankers could limit the wider impact, as diesel markets have become increasingly regional.
Russia, according to Katona, last supplied diesel to the US in 2022, with arrivals peaking at 210,000 tonnes in December that year. No cargoes have arrived since 2023.
What it means for India’s oil trade
For Indian refiners, the bigger risk lies in changing regional trade flows and potential pressure on export margins rather than direct competition from Russian diesel in the US.
India exported 630,000 barrels per day (b/d) of diesel in September, of which Europe took 280,000 b/d. These shipments had largely been contracted one to two months earlier, Katona said.
The outlook will depend on whether China resumes larger diesel exports and how shipping costs to Europe evolve.
“If China starts flooding the Singapore and Southeast Asian markets, India will have no option other than to re-orient flows towards East Africa and Europe,” Katona said.
China’s planned return to diesel exports has already pushed down refining margins in Singapore to $64-65 per barrel, she added. If shipping costs to Europe remain high, Indian refiners may find it more profitable to sell their diesel in Asian markets instead.
Shokri said a possible recovery in Russian diesel production and exports could increase competition for Indian fuel, particularly in Europe, where shipments grew in September. The greater availability of Russian diesel could narrow price premiums and compress Indian refiners’ margins, he said.
The scale of the impact will depend on how much Russia can produce and export, given continuing refinery damage and export restrictions.
For India, the key variables are Chinese exports, Russian supply, regional diesel margins and freight rates. These factors will determine where Indian fuel can be sold most profitably as shifting trade flows and sanctions reshape the global diesel market.
(Edited by Tony Rai)
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