Treasury Waiver Follows Diplomatic Call
On October 9, the Treasury Department issued a six-month waiver allowing Russian diesel to be sold on the global market. This action occurred hours after a phone call between President Trump and President Putin.
The stated aim of the waiver is to bring down fuel prices before the November 3 midterms. The move marks a shift in policy regarding Russian energy sanctions, which have been in place since the conflict in Ukraine began.
A Broader Strategy to Contain Beijing
According to analysis by OilPrice, the waiver fits into a larger strategy for the United States to control as much of the world’s energy supply as possible while denying it to China. This approach involves isolating Beijing from key energy sources through multiple geopolitical maneuvers.
Since US forces captured President Maduro in January, Washington has effectively controlled Venezuela’s oil exports, and shipments to China have collapsed. Additionally, with the Strait of Hormuz closed, Gulf and Iranian energy has been choked off from China. The President claims “total control” of the Strait of Hormuz, a move that would starve China of Middle Eastern supply.
With Gulf oil cut off, Russia has become China’s major energy supplier. The diesel waiver is viewed as a first step toward easing sanctions on Russian energy and bringing US oil companies back to tap Russia’s vast reserves.
Nord Stream and Historical Parallels
Reuters reports that Washington and Moscow have discussed a role for a US investor in the Nord Stream pipelines, which were sabotaged in 2022. The author suggests US ownership of the Nord Stream pipelines would provide a fig leaf enabling Europe to resume buying Russian gas without appearing to capitulate.
This strategy appears to take a page from Nixon and Kissinger, who opened relations with China in the 1970s, but running the play in reverse to pry Russia away from China. Russia has long been frustrated as the junior partner in its relationship with China, which has delayed Russia’s proposed second gas pipeline for over ten years.
Geopolitical Costs and Domestic Fallout
The author expects the Ukraine war to end on terms less favorable than Moscow has sought, with marginal concessions at the edges of its conquests. Trump is seeking a historic achievement in his quest for the Nobel Prize. However, President Zelensky will vigorously oppose the plan and appeal to European allies.
Washington is expected to press Kyiv by reducing military and intelligence aid. Moscow would have to scale back its military and intelligence support for Iran as part of this strategy. The costs of this strategy include higher energy prices, worldwide inflation, and continued emissions.
In Europe, energy bills driven up by the loss of cheap Russian gas and the closure of Hormuz are feeding public anger and the rise of right-wing parties. In the United States, affordability may cost Republicans control of Congress.