Financing Russian Diesel Deliveries to the United States Amid Ongoing Sanctions

Following the recent agreement between the leaders of Russia and the United States on supplying Russian diesel fuel to the U.S. market, experts have raised concerns about possible difficulties in paying for the fuel amid the financial sanctions imposed on Russia. The main question was how payments for the petroleum products would be processed, given that both the fuel suppliers and major Russian financial institutions are subject to Western sanctions. In other words, could the fuel recipient make a good-faith payment to the supplier’s account at a Russian bank, only for the funds to be blocked in the latter’s correspondent account at a U.S. intermediary bank?

Recent statements by U.S. officials dismiss these concerns and guarantee that, for the duration of the trade agreement, the parties to the deal will receive full legal protection against the risk of funds intended to pay for the diesel being blocked.

Payments between the parties will be made under General License No. 135, issued specifically for this case by the U.S. agency responsible for enforcing sanctions—the Office of Foreign Assets Control (OFAC). The document, which remains valid until April 7, 2027, authorizes U.S. legal entities and individuals to conduct transactions related to the import of diesel fuel from Russia. In the context of sanctions enforcement, an OFAC license carries the highest legal authority, giving businesses clear authorization to conduct the relevant transactions and ruling out the possibility of fines or criminal prosecution by the U.S. government.

The transaction will be denominated in U.S. dollars, as the licensing requirements govern operations in that currency. This is convenient for Western counterparties and allows U.S. banks to issue standard commercial letters of credit without impediment. The payment mechanism specifies a clearly defined group of U.S. financial institutions authorized to facilitate the “diesel deal.” Transfers will also be processed through Russian banks operating under sanctions, or through authorized correspondent banks in neutral countries acting as permitted gateways for international transactions.

The U.S. Treasury Secretary has officially stated that the existing anti-Russian sanctions and domestic congressional initiatives do not pose legal obstacles to processing payments. This statement does not seem out of place given the introduction in the House of Representatives of a bipartisan bill that would, among other things, revoke existing licenses and prohibit the issuance of new U.S. Treasury licenses related to Russia. It is also worth remembering the 2022 U.S. law banning imports from Russia of crude oil, petroleum products, gas, and coal—a provision that directly conflicts with the current decision by the U.S. administration to allow Russian diesel deliveries to America. These facts leave an area of uncertainty surrounding the “diesel deal” between Russia and the United States, one that depends entirely on the domestic political climate in the United States.

Author: Doctor of Economics, Professor in the Department of World Economy and World Finance at the Financial University under the Government of the Russian Federation, Gennady Anatolyevich Shcherbakov.