(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
By Yawen Chen
LONDON, Jan 13 (Reuters Breakingviews) – Joe Biden is getting tough on Russian oil, at the very last minute. On Friday, barely a week before the inauguration of President-elect Donald Trump, his predecessor sanctioned 183 tankers and various other parts of Moscow’s oil-exporting infrastructure – sending crude prices up 5%. That risks cutting across Trump’s plans for Iran.
Biden’s new direction reverses the approach broadly followed since President Vladimir Putin invaded Ukraine in February 2022. Formerly, the U.S. aimed at capping the price of oil some way below the market level, meaning it still flowed to buyers like China and India but limited the scale of price spikes. This time the U.S. is targeting tankers that transported some 25% of Russia’s 6.8 million barrels of daily exports in 2024 – per Goldman Sachs analysts. The White House’s rationale is simple: in 2025 the global oil market is seen as oversupplied due to a sluggish Chinese economy and new production from countries like Guyana.
The U.S. may be correct that this means oil prices won’t soar. The actual impact in any case depends on how quickly Moscow can find non-sanctioned vessels to transport its oil. Most of these exports went to China and India last year, RBC analysts found. If Russia discounts its oil aggressively, they may still eventually find a way back into the market. If they don’t, Trump may be able to lean on the Organization of the Petroleum Exporting Countries and its allies to pump more from its massive spare capacity of over 5 million barrels a day. And in the meantime the sanctions give the U.S. some leverage in pressuring Russia into a deal to end its war in Ukraine.
Still, Trump also wants to subject Iran to “maximum pressure” to limit its nuclear ambitions. Even if the incoming president avoided going directly after Chinese refineries that buy 90% of Iranian oil, he could take most of Tehran’s 1.7 million barrels of exports a day out of the market by sanctioning tankers. Yet doing that while simultaneously ramping up Russian sanctions would be risky if OPEC proved less than keen to pump more. In that scenario, Trump’s other key energy objective – low global oil prices – would start to look shaky.
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(Editing by George Hay and Oliver Taslic)