Russia-Ukraine, Iran wars: Why the US may ease sanctions on shadow fleet tankers — and what it means for both conflicts

The US is contemplating easing sanctions on oil tankers associated with Russia and Iran as the administration battles high diesel prices ahead of mid-term elections. This move could boost shipping capacity and lower freight costs, but it may weaken Western pressure on Russia in its conflict with Ukraine. The proposal includes allowing sanctions to be lifted so these vessels can operate in global markets on a case-by-case basis, provided legitimate buyers purchase them and restore them for lawful use.

US Energy Secretary Chris Wright raised this at the World Petroleum Conference in Saudi Arabia, arguing that tanker shortages are a key bottleneck driving up global freight rates and fuel costs. US inflation jumped to 3.7% in September, with fuel prices significantly impacting the economy. The White House has tried to counter the surge by urging allies to release more diesel and threatening an export ban.

However, diesel prices remain high at an average of $6.31 a gallon, just below a record high of $6.53. While easing tanker sanctions might marginally reduce prices, analysts question its effectiveness due to the age and poor condition of many sanctioned vessels. Russia could benefit from increased oil trade, potentially weakening economic pressure on Putin's war effort in Ukraine.

Easing restrictions could also help contain fuel costs amid conflict-related disruption in the Middle East, as in the Iran war. However, relaxing sanctions without significantly improving supplies could lead to criticism for weakening sanctions without delivering meaningful relief at the pump.