US companies are unlikely to import Russian diesel, experts told Reuters, even though President Donald Trump temporarily waived some sanctions on Moscow's fuel exports. Banks may balk at financing deals, legal questions linger, and the fuel would need blending for US specifications.
A tanker carrying the first cargo of Russian diesel for the US halted its voyage off the East Coast this week, shipping data showed on Tuesday. Its operator said the destination had not yet been decided.
US Energy Secretary Chris Wright said he was confident the idled tanker would help supply global markets even if it did not land at a US port. Experts, however, expect few American buyers.
Waiver aims to lower diesel prices
Trump's plan would allow Russia to immediately export 300,000 tons, or 2.25 million barrels, of diesel to US and global markets. That would be followed by 500,000 tons in November and 1 million tons "immediately thereafter."
The aim is to lower diesel prices that spiked during the US-Israeli war on Iran. The US price was $6.13 per gallon on Wednesday, according to the American Automobile Association. That is down 20 cents from $6.33 on the day Trump waived the sanctions in October, but up 63% from $3.76 before the war began in late February.
Banks, lawyers and lawmakers push back
Banks are unlikely to finance such deals, said David Tannenbaum of Blackstone Compliance Services. According to Tannenbaum: "I would be a hard pass," weighing the money from a single deal against compliance costs.
Buyers could also face legal risks, said sanctions lawyer Jeremy Paner, and any savings could be wiped out by hundreds of thousands of dollars in legal fees from likely congressional investigations. Dozens of US senators, including six Republicans, have called on Trump to rescind the deal. A Trump administration official said the waiver complied with all applicable laws.
Blending adds another hurdle
Importers would also need to blend the Russian diesel to meet New York Mercantile Exchange heating oil specifications, Natalia Losada of Energy Aspects wrote in a note. She added that cargoes may still end up diverting to Brazil or other more traditional destinations.
Janiv Shah of Rystad Energy said that if the first vessel cannot dock or discharge in a US port, that creates a hurdle for every further vessel on its way.
Source: Reuters via Investing.com
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