Trump and Putin's Diesel Deal: The First Month

Russia nearly doubled its diesel exports in October, yet not a single barrel reached the United States, the country the deal was meant to serve. Several causes are at work, and together they form a picture in which legal risk, political pressure and the physical limits of Russian refining reinforce one another.

What Happened

On October 9, Donald Trump announced an agreement with Vladimir Putin. The same day, the US Treasury issued General License 135, which permits transactions in Russian diesel, including its import into the United States, until April 7, 2027. According to Trump, Russia was to deliver more than 300,000 tonnes up front, 500,000 in November and a million later, for a total of up to 1.8 million tonnes.

Russian exports did rise. Kpler data cited by the Financial Times show the country shipping 271,000 barrels a day in October, against 135,000 in September, with the extra volumes going to Brazil, Turkey and other markets. But nothing reached the US. Between three and five tankers (sources give different numbers) were heading for the American coast, and, according to the FT, at least two of them changed course.

The case of the Agioi Fanendes is especially telling. The Malta-flagged vessel loaded about 40,000 tonnes of ultra-low-sulfur diesel at Primorsk on October 22 and was expected in New York on November 7. The FT and Kpler now report that it is almost stationary in the North Atlantic, and its draft has not changed, meaning the cargo has not been discharged. Bloomberg says that since November 9 it has moved roughly 400 nautical miles away from New York. The ship's manager, Eastern Mediterranean Maritime, told Reuters that no discharge port has been determined.

Why the Ships Never Arrived

The first reason is legal. The Treasury license permits imports, but the 2022 law banning imports of Russian oil and refined products has not been repealed, and Congress has not amended it. As Bloomberg reports, many traders doubt that Treasury's permission overrides the statute, despite White House assurances. Senator Richard Blumenthal wrote to the head of the company managing the Agioi Fanendes that the president may issue a license but that "only Congress can make it legally valid," and he asked that the vessel be halted.

The second reason is political. New Jersey Governor Mikie Sherrill sent a letter to terminal operators, including Kinder Morgan, IMTT and Phillips 66, warning of civil and criminal penalties for unloading Russian fuel. She noted that the law allows the ban to be waived only if the president certifies that Russia has agreed to withdraw its troops from Ukraine, and no such certification exists. Kinder Morgan responded that it does not accept Russian diesel at its terminals. Phillips 66 chief executive Mark Lashier said the company has "no intention of buying Russian diesel."

The third reason is commercial. The volumes are too small to move prices: Phillips 66 believes the shipments would have no noticeable effect on the American market. The three tankers bound for the US carried about 924,000 barrels combined, roughly a third of daily US transport diesel consumption, according to Newsweek, citing Kpler. One of the vessels, the Leruo, is sanctioned by the EU, the UK and Canada, and the Talisman is believed to be under US and EU sanctions. Banks, insurers and buyers typically avoid such ships, and the risk of litigation remains high.

The fourth reason is physical. Russia has extended its diesel export restrictions through the end of January, with exceptions. Ukraine resumed strikes on refineries on October 30 after a two-week pause, and Reuters reports that about 30% of Russian capacity has been affected. According to the Telegraph, the volumes planned for October and November would cover only a day and a half of American consumption. "The deal is dead," said David Tannenbaum of Blackstone Compliance Services. Kpler analyst Sumit Ritolia expects the pressure on Russian plants to continue.

What It Means

For the White House, the outcome is awkward. A spokesperson said the agreement remains in force and should lower prices for Americans and for the world. Energy Secretary Chris Wright said the vessel would go to another port and that the goal is for the fuel to reach global markets. The wording has shifted from "for the American market" to "for the global market."

For Russia, the result is mixed. It sold additional volumes to Brazil and Turkey, and Brazilian distributors are now being offered that same Russian diesel, Bloomberg reports. But exports remain far below normal: Energy Aspects puts the five-year average for October at about 700,000 barrels a day. Novak has said that by the end of the year the country could return to its usual 3 to 3.5 million tonnes a month. Reuters reports that November quotas will rise to 2 million tonnes, but Ukrainian strikes cast doubt on that.

For American law, the precedent matters. If a court or Congress settles whether a license can override a statutory ban, it will define the limits of executive authority over sanctions. For now, entering a port without a buyer makes no sense: nobody wants to be the one to test the question in practice.

Projections

First, the vessel will most likely head to Brazil, the Caribbean or another port outside the US. Its "for orders" status and Wright's remarks point that way.

Second, further cargoes will not sail for the American coast until the legal question is clarified. If Congress takes up the issue, uncertainty will grow rather than shrink.

Third, the main beneficiary will not be the American consumer but those who buy Russian fuel at a discount. By Phillips 66's estimate, the effect on US prices is small.

Fourth, if the strikes on Russian refineries continue, the volumes Trump promised will simply never appear on the world market, and the question of the ships will become secondary.

It appears Trump was trying to talk prices down ahead of the elections with a headline. It didn't work.