Oil refinery in Yaroslavl, Russia. Nikolay N. Antonov/Adobe Stock

In March, the US government issued highly controversial waivers for sanctions on Russian and Iranian oil to ease the crisis caused by the Iran war. Following the expiry of the 30-day suspension of sanctions, which allowed the purchase and delivery of oil already loaded onto vessels, the US extended the measure on Russian oil until May.

The decision to ease sanctions against Russia prompted European countries, including the UK and Germany, to insist that the US and its allies should continue to maintain maximum pressure on Russia over its invasion of Ukraine. US lawmakers have also criticised the waivers, arguing that they stand to benefit the economies of Iran and Russia.

Biersteker says, that despite restrictions on Russian oil purchases and other economic sanctions not ending Russia’s invasion of Ukraine so far, evidence that sanctions are resulting in higher costs for Russia’s economy and changing its geoeconomic activity, demonstrate they are fulfilling their intended purpose of constraining Russia and limiting its ability to finance its war efforts. ‘The other important reason for sanctions is to send an affirmative signal that it is not ok to invade other countries,’ he says. ‘The United Nations system is founded on the idea of territorial integrity and opposition to the use of force to resolve disputes […] and Russia egregiously violated that norm’.

Since far-reaching international sanctions were imposed on Russia following its invasion of Ukraine in 2022, Russia has been forced to sell its oil at a discount and has spent billions on sophisticated circumvention efforts. These include added costs to import technology and military components through alternative supply routes and purchasing aged tankers to build a shadow fleet to transport sanctioned oil under the radar of the authorities.

Whether companies involved in the transatlantic oil trade have used the US waivers so far, and any effect on the Russian economy, remains uncertain. Dara Fernandez, a partner at national security advisory firm Cina Fernandez, says it is difficult to see a situation where the waiver on Russian oil would be used by companies involved in the transportation of crude because, when considering sanctions risk, they must factor in the likelihood of banks being willing to participate in transactions. Though there might be permission under one regulatory regime, there isn’t equivalent permission or national security interest in other jurisdictions. ‘Even though the waivers may create quite a lot of noise, the reality is, once you start analysing the transaction, the involvement of different points of regulatory nexus as part of the supply chain and, most importantly, the need for support of a banking partner, the waivers may not actually authorise the intended transaction,’ she says.

There is also reputational and future regulatory risk to consider, says Chloe Cina, also a partner at Cina Fernandez and the former Global Head of Sanctions Advisory at Deutsche Bank. While a handful of companies may be tempted to make some quick cash by relying on the waivers, most global, mature businesses are thinking beyond the term of the current administration. ‘Decisions taken, which could be critical when it comes to any area that is under scrutiny of the regulator, need to be defensible not just now or in four years’ time, but beyond this administration and further ahead,’ she says.

Cina says that the sanctions relief on Russian oil is likely to legitimise shadow fleet operators who may now view themselves as a force for good in helping ease the global rise in oil prices. ‘This is why our leaders, like Ursula von der Leyen, have been insistent about maintaining the pressure on Russia despite the real economic and energy security concerns that we face here and beyond the EU’s borders,’ she says.

President of the European Commission, Ursula von der Leyen, has stressed that the war in Iran and subsequent spike in global oil prices ‘is not the moment to relax sanctions on Russia’ and that enforcing the oil price cap – which prevents EU and UK businesses from facilitating the transport of Russian crude sold above $44 a barrel – will help stabilise global markets and limit Russia’s revenues. Yves Melin, a partner at Cattwyk in Brussels and Co-Chair of the IBA International Trade and Customs Law Committee, says that he expects the EU’s 20th sanctions package will continue to increase pressure on Russia, adding that the recent change of government in Hungary, which was previously known for its close ties to the Kremlin, is likely to mean it is adopted by the Council soon. ‘The mood currently is to continue preventing European companies and operators from dealing in Russian oil and gas,’ he says.