The United States extends waivers on sanctions against Russian crude oil to stabilize international oil prices

The backdrop for the U.S. extending its sanctions-exemption measures on Russian oil for another month is the strong call from the Group of Twenty (G20) to lower international oil prices.

U.S. Energy Secretary Chris Lighthizer explained the reasons the United States changed its approach and allowed further trading in Russian crude oil and petroleum products during an interview with CNN on the 19th, saying that the G20 finance ministers and central bank governors asked to stabilize energy prices. He said that at the recent G20 meeting, countries all expressed concern about the burden of high oil prices, and the U.S. took temporary response measures. The meeting Lighthizer mentioned was interpreted as the G20 meeting of the finance ministers and central bank governors held in Washington, D.C., on the 16th.

This measure has drawn even more attention because the U.S. government reversed its position within a few days. On the 15th, U.S. Treasury Secretary Scott Bessent said it would not extend the one-month Russian oil sanctions exemption that ended on the 11th, but just two days later, on the 17th, the U.S. Treasury announced that it would again allow the sale of Russian crude oil and petroleum products for another month. Previously, on the 12th of last month, the U.S. Treasury had also allowed the sale of sanctioned Russian crude oil for 30 days. At the time, some assessments said this alleviated, to a certain extent, the supply shortage in global energy markets that had been roiled by the impact of the Strait of Hormuz blockade.

Lighthizer said the current trend is that Russian crude oil is in fact concentrating toward China, and explained that the purpose is not to have it go only to China, but also to refineries in other parts of Asia in order to lower energy prices in Asia and Europe. However, he said that such exemptions are not permanent, and the U.S. sanctions on Russian oil will eventually tighten again. This has been interpreted as emphasizing that the decision is not a fundamental shift away from the diplomatic route, but a temporary adjustment in response to the spike in energy prices.

The issue is that such sanctions exemptions also come with other political and diplomatic burdens. Critics have pointed out that allowing some Russian crude oil transactions could give Russia breathing room for its actions in the Ukraine war or support for Iran. In other words, the United States is seeking a realistic balance between the pressure effects of the sanctions it is imposing and the goal of stabilizing international oil prices. Because as long as the energy market sees even slight supply volatility, prices will surge, sanctions policy has gone beyond purely diplomatic tools and become an economic variable that directly affects prices and financial markets.

Regarding its outlook for domestic gasoline prices in the United States, Lighthizer said that the peak seems to have passed, but more time is needed for prices to fall back to pre-war levels. The average U.S. gasoline price in February this year was only in the $2.9 per gallon range, but after the outbreak of the Iran-U.S. war it surged by more than 40%, and is currently staying in the $4.1 per gallon range. He said that the point at which prices might drop back below $3 per gallon could be by the end of this year or could be next year. Ultimately, the future trend of international oil prices is likely to depend on how conflicts in the Middle East unfold, the timing of a further tightening of sanctions on Russian crude oil, and how major countries’ needs for price stabilization interact with one another.