Russia shouldn't get too excited about oil sanctions relief

The U.S.-Israel war on Iran has, unsurprisingly, destabilized global energy markets. Oil prices shot up by around 30% to $119 per barrel earlier this week, marking a four-year high that is starkly felt by Washington’s alliance network in Europe and parts of Asia.

The spike in oil prices stems from supply shortages and logistics constraints that, even if the U.S. takes steps to guarantee partial traffic through the blockaded Hormuz Strait, will likely persist throughout the duration of the war.

The White House, in an attempt to ameliorate global energy pressures stemming from the war, has temporarily lifted some sanctions on Russian oil. These steps include a recent decision to approve a 30-day waiver on Indian purchases of Russian oil; additional measures in this vein may be expected following a phone call between President Donald Trump and Russian President Vladimir Putin on Monday.

These moves, though clearly not intended with larger linkages in mind, cannot be entirely divorced from the context of American-led efforts to secure a peace deal to end the Ukraine war. There are several analytical strands to pursue here.

First, though the global spike in oil prices is unquestionably a boon for Moscow, these macroeconomic gains will take time to be reflected in Moscow’s economic ledgers and even longer to be translated into additional military capabilities to help Russian forces prosecute the war against Ukraine. Current developments in the Middle East are unlikely to shape Russia’s military strategy. After all, the Kremlin knows better than anyone else the pitfalls of basing long-term decisions on the short to medium term vicissitudes of energy markets.

The more immediate benefit for Russia is the fact that the U.S. is expending stockpiles of weapons and interceptors that could have otherwise gone to Ukraine, further widening the existing firepower gap between Russia and Ukraine as the war grinds into its fifth year. Though this won’t fundamentally alter the course of the war in the near future, it further solidifies a losing trajectory for Ukraine. And these weapons shortfalls could begin to exercise serious constraints on Ukraine’s armed forces if the Iran war goes on indefinitely without accompanying U.S. production increases that factor in Kyiv’s needs.

Then there are the potential effects on Ukraine negotiations. The White House has heretofore pursued a strict policy of linking sanctions relief and U.S.-Russia economic cooperation to a peace deal that ends the war. The latest round of oil waivers is the first major example of decoupling sanctions from peace talks, something the Kremlin has long sought but was unable to get until now.

This move raises the concern that the White House, in a bid to arrest the spike in global energy prices, is weakening leverage it could use to secure the Russian concessions necessary to make the Ukraine settlement stick. Moscow, if it perceives that it has a separate pathway to economic relief without a Ukraine settlement, may be incentivized to push for steeper concessions on territory and security that may be unacceptable to Kyiv, thus jeopardizing positive diplomatic momentum made over the past half year of difficult but constructive negotiations.

U.S. negotiators can take steps to contain this unintended spillover effect by emphasizing to their Russian counterparts that these are temporary measures for the narrow purpose of stabilizing global energy markets and that a fuller, permanent removal of sanctions is squarely linked to a Ukraine settlement. Put differently, these waivers are best presented as a small, temporary preview of things to come if Moscow takes the necessary steps to finalize the peace deal currently being negotiated.

To this end, quietly relaxing enforcement of certain sanctions offers a lower risk of policy contagion than officially waiving them, and these temporary measures can continue to be extended for short-term windows of around 30 days pending renewal so as not to give the impression that they have been institutionalized. Most importantly, the White House should continue to convey to Moscow that, despite whatever extraordinary measures it pursues in the short term, its core philosophy on diplomatic linkages has not changed. Long-term sanctions relief should be, and is, on the table as part of a framework peace deal; the administration can credibly argue that without it, there is not a politically and geopolitically viable basis for sustainable U.S.-Russia engagement, including on economic issues.

One of the principal pitfalls of using sanctions to compel a change in state behavior is that, in order for sanctions to play their intended role, the side being punished must believe that the restrictions can be lifted. The Trump administration has demonstrated through its engagement with Belarus and Syria that it commands the flexibility and situational judgement to lift sanctions when circumstances call for it. The latest crop of waivers on Russian oil is yet another indication to Moscow that sanctions relief is on the table, but these measures can and should be packaged in ways that do not unnecessarily burden the Ukraine peace process.