The Trump administration is considering easing sanctions on shadow fleet vessels that have transported oil and petroleum products from countries including Russia, Iran, and Venezuela, in an effort to reduce record-high global freight rates, a US official stated on Wednesday.
These discussions follow President Donald Trump's recent decision to temporarily lift sanctions on Russian diesel fuel, which drew criticism from Ukrainian President Volodymyr Zelensky, European nations, and some Republican senators in the US. Both Zelensky and the senators described this action as beneficial to Russian President Vladimir Putin, potentially providing Russia with revenue to continue its military actions in Ukraine.
The current talks focus on the possibility of allowing “legal oil” to flow on previously sanctioned vessels, according to the US official. This would involve crude or petroleum products not subject to US sanctions, rather than Russian and Iranian oil, which remain under punitive measures. The objective is to increase the availability of refined products and crude oil from the Gulf.
US Energy Secretary Chris Wright mentioned in a video to the World Petroleum Congress in Riyadh that the administration is discussing easing sanctions on shadow fleet vessels to help reduce freight rates that have negatively impacted demand for US crude, as reported by Energy Aspects, a research group.
While some details of the discussions were shared on social media, Reuters was unable to access the complete video or transcript, and the Department of Energy stated it was not available. Companies interested in utilizing the sanctioned vessels would need to apply to the US Treasury Department for permission.
The Department of Energy emphasized that any potential easing of sanctions on the shadow fleet would not assist Russia in moving oil or oil products. The Treasury Department directed inquiries to the Department of Energy.
Trump's initiative to expedite the movement of Russian diesel to global markets may exert pressure on the relevant departments to permit shipments via these vessels. The White House did not immediately respond to a request for comment.
High oil and fuel prices pose a risk for Trump in the upcoming midterm elections on November 3, where Republicans aim to retain control of both chambers of Congress. He lifted the sanctions on Russian diesel through April 7.
Tanker freight rates have surged to unprecedented levels due to the conflicts in Iran and Ukraine, contributing to inflation and making US crude oil less accessible for Asian refiners, who are turning to alternatives from the Middle East and Latin America.
Energy Aspects noted that easing sanctions on the shadow fleet is unlikely to significantly affect freight rates but could facilitate additional oil movement in the Middle East. The organization stated that lifting sanctions on older, poorly maintained tankers is unlikely to quickly enhance mainstream fleet capacity, especially since most sanctioned tankers have been actively trading in recent months.
Easing restrictions could make a limited number of additional tankers available for specific shuttle runs in the Strait of Hormuz, a waterway between Iran and Oman. However, maritime industry sources indicated that lifting these measures is not expected to lead to a broad reduction in freight rates, as ship insurers will still be subject to EU and UK regulations.