Biden Administration’s Lenient Sanctions on Russia and Iran Aim to Stabilise Fuel Prices Before Elections

In a bid to stabilise fuel prices ahead of the upcoming elections, the Biden administration has intentionally implemented softer energy sanctions against major oil-producing countries like Russia, Iran, and Venezuela.

This strategy, as reported by The Wall Street Journal, seeks to maintain a steady supply of oil to global markets, thus keeping gas prices stable for American consumers.

The administration’s approach aims to balance the need for affordable fuel with the desire to be tough on adversarial states.

Recent actions illustrate this delicate balance. For instance, new sanctions imposed on Iran on Tuesday were designed to affect only a segment of the country’s oil exports, a move analysts believe will have limited impact on global markets.

A senior administration official emphasised the president’s commitment to ensuring that American consumers benefit from lower gas prices, recognising the significant impact of fuel costs on everyday life.

“The president wanted to do everything possible to make sure that American consumers have the lowest possible price at the pump, as this affects the daily lives of families,” the official said.

Despite escalating tensions between Iran and the US following attacks on Israel on 7 October, Iran’s daily oil exports have exceeded 1.5 million barrels since February, a substantial increase compared to the early days of Biden’s presidency. Much of this oil is purchased at discounted rates by small Chinese refineries.

John Smith, a partner at Morrison Foerster and former head of the US Treasury’s Office of Foreign Assets Control, noted that the US and its allies have been “very, very careful not to go too far and hurt the ability of Western economies to function” when implementing sanctions.

For decades, American diplomats and energy officials have worked globally to ensure a steady oil supply, often forming uncomfortable alliances and agreements.

On 12 June, when the US Treasury imposed a new wave of sanctions on Moscow due to the war in Ukraine, these sanctions targeted banks but left Russia’s oil industry largely untouched.

There is growing frustration among some US Treasury staff about the lack of action against oil trading networks that transport Russian and Iranian oil. According to industry insiders and informed government officials, one such network is run by a little-known trader from Azerbaijan, who has become a key intermediary for Russia’s state-owned Rosneft.

Proponents of this lenient sanctions policy argue that it is well-balanced, keeping oil prices low while hindering the oil export operations of Russia and Iran. This strategy ensures these states earn less revenue per barrel of oil sold.

“Our two goals – reducing costs for the American people and reducing revenues for the Kremlin – are very well aligned,” a senior Treasury official stated.

When the Treasury imposed sanctions on Russia’s state-owned tanker operator Sovcomflot, it simultaneously issued licenses exempting the company’s entire fleet, except for 14 vessels, from sanctions. According to data provider Kpler, Sovcomflot operates 91 vessels. Industry players indicate that these exemption licenses effectively gave oil traders the green light to do business with these ships, minimising the risk of them becoming targets for future sanctions.

Read also:

EU Council Approves 14th Package of Sanctions Against Russia

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