Apart from windfall revenues from higher oil and gas prices and the political leverage that comes from supplying the Global South with fertilisers, how much sanctions relief can Russia also expect amid the war in the Middle East?
Some relief is already here. On 12 March, the United States amended its sanctions on Russian oil tankers already at sea. Under an updated general licence, Washington continued to allow the sale of Russian crude and petroleum products loaded onto vessels as of that date. It also globally extended a month-long Treasury department waiver, issued a week earlier, that had allowed India to buy Russian crude and petroleum products loaded between 12 March and 11 April. This is despite warning Delhi earlier this year that, should India fail to wean itself off Russian oil by April, a US trade deal would be off the cards.
Some European leaders were unimpressed. ‘Lifting the sanctions will… lead to a strengthening of Russia’s position,’ said Ukrainian president Volodymyr Zelensky after talks with his French counterpart Emmanuel Macron on 13 March. ‘This easing alone by the United States could provide Russia with about $10 billion (£7.5 billion) for the war,’ he added. Scott Bessent, the US Treasury Secretary, described the move as ‘narrowly tailored’ and ‘short-term’.
The US waiver for Russian oil hints at a broader softening of enforcement
So who is right? On the immediate fiscal question, Bessent has a point – and Zelensky’s estimate doesn’t hold water. Or oil, for that matter.
The Russian budget funds the war primarily through oil taxation, levied on the volume extracted and the monthly average price realised. The oil covered by the waiver had already been sold before Washington acted – the revenue booked, the tankers loaded, the Urals crude oil price locked in. The waiver does not change any of that retroactively. The direct budgetary gain from releasing these specific cargoes is negligible.
Where Russia does gain – and substantially – is from the oil price spike itself. Every extra $10 (£7.50) per barrel adds roughly $1.6 billion (£1.2 billion) a month to Russia’s federal budget. Oil has risen from around $70 (£53) before the war to $100 (£750) now: that’s a $4.8 billion (£3.6 billion) windfall landing in a budget that had already been running thin. At current prices, Russia can expect close to 1 trillion roubles (£9.3 billion) in oil revenues in April alone – the highest since late last year and 75 per cent above March. Spending cut plans have been quietly shelved. The war, it turns out, is self-financing rather better than Moscow had any right to expect.
But back to the sanctions waiver. A shrewd trader might attempt to resell the floating barrels, but any profit would flow to them, not the Kremlin’s budget as Zelensky suggested. Yet this is a sanctions relaxation nonetheless – and in a volatile market, signals carry as much weight as legislative change.
The US waiver for Russian oil hints at a broader softening of enforcement. If traders and buyers read it as a reduction in sanctions risk, the discount for Urals crude oil compared to Brent crude will narrow. That feeds directly into the average price of oil the Kremlin uses for its tax calculations – and, consequently, flows into future oil revenues.
It also frees up tankers that had been effectively stranded, unable to take on new cargo. More available tonnage means lower shipping costs and higher net revenues for Russian oil companies. The shadow fleet operators – tanker owners, flag-of-convenience registries and the murky network of intermediaries that keep Russian oil moving – have been working under the constant threat of secondary sanctions. Even a narrow, one-off waiver reduces their risk premium, and that saving passes through to Russian exporters.
Trading counterparties face lower legal and reputational exposure too, easing the commercial mechanics of future sales well beyond the specific cargoes in question. In the longer run, reduced sanctions pressure could attract investment and nudge production higher – though that remains a distant prospect.
The most important gain, however, is neither fiscal nor commercial. It is the precedent. Washington has demonstrated that sanctions on Russian oil can bend when energy prices become politically inconvenient. That is an exceptionally useful data point for Moscow’s sanctions diplomacy – and it quietly corrodes the credibility of the wider sanctions architecture levied against Russia. That erosion, compounding over time, is worth more to Vladimir Putin than the revenue on any tanker currently making its way through the Indian Ocean.
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