While it is very trendily woke to attack U.S. President Donald Trump whenever possible, the truth is rarely trendy or woke — it is usually tough, pragmatic, and increasingly unpopular in today’s world. Precisely where his recent decision to import Russian diesel into the U.S. fits into this matrix remains to be seen, but there is a lot more to it than initially meets the eye. So, what is that exactly?
On the face of it, there seems little sense to the deal struck between Washington and Moscow that will see Russia release 300,000 tonnes — 2.24 million barrels — of diesel immediately, ‘to the American and global marketplace,’ followed by 500,000 tonnes in November and a further one million tonnes shortly after that. Trump’s announcement explicitly included a conditional additional 3 million tonnes to be delivered ‘within a short period’, pending refinery conditions. In context, global diesel supplies have been hit hard by the U.S.-Israel war against Iran. Before the onset of the war and the subsequent closure of the Strait of Hormuz, the Middle East accounted for around 20 percent of all global diesel exports. That said, the total amount of diesel to be released by Russia in the first phase will be 1.8 million tonnes, which equates to 13.41 million barrels. If the conditional second phase release occurs, then the total release would increase to 4.8 million tonnes, or 35.76 million barrels — not per day, in total.
By comparison, the U.S.’s daily consumption of diesel averaged 3.91 million barrels per day (bpd) over 2025, while the world’s daily consumption of diesel in 2025 averaged approximately 27.2 million bpd. So, the entire amount of diesel to be released by Russia in the first phase of this deal is only sufficient to cover slightly over three days’ use in the U.S. or just over half a day across the globe. If the conditional additional 3 million tonnes is delivered, then covered consumption would rise to just over nine days in the US and slightly above one day globally. Crucially, although no pricing details were made known in the deal announcement, if fixed around current wholesale spot pricing, the first part of the deal would pump around USD2.8 billion into the Kremlin’s coffers at a time when international sanctions have begun to squeeze its economic ability to keep fighting Russia’s war in Ukraine. If the conditional second part were included, then this would rise to just over USD7 billion, if no discount were applied. In short, the amount of diesel involved looks to be such as to make no discernible difference to the U.S. or global price of diesel over time, while at the same time being sufficient to keep bankrolling President Vladimir Putin’s murder spree in Ukraine. Related: What’s Trump’s Thinking Behind The ‘Diesel Deal’ With Russia?
This is understandably the view of Ukrainian President Volodymyr Zelensky, who said the deal with the U.S. would allow Moscow to raise new funds to source new military equipment to continue the war. He added that it was a “gift” to Putin that Russia would “repay” with “terror and perfidy… Allowing Russia to sell petroleum products is an investment in a war that must be ended, not prolonged”. The potentially seismic importance of the deal to Russia’s war effort in Ukraine is clearly shared by the Kremlin itself, given the extremes to which it seems prepared to go to meet this newfound export obligation to the U.S. Following the devastating wave of Ukrainian drone strikes through July and August, Russia lost up to 45 percent of its operational refining capacity in Western and Central Russia. This meant that Moscow took the unprecedented step of banning all diesel exports from the country on 8 July and importing seaborne diesel and gasoline from India and South Korea to cover the internal deficit.
Therefore, to stand any chance of meeting even Trump’s first-phase 1.8 million-tonne diesel package, Putin will have to redirect the 1.1 to 1.2 million bpd of diesel that remains largely out of the range of Ukrainian drones in places such as Siberia and the Far East and reimpose restrictions on domestic diesel consumption. He will also have to import even more fuel from Asia to backfill the volumes sent to the U.S. and elsewhere in the West. Nonetheless, aside from the much-needed cash injection to keep funding his war in Ukraine, the benefits of the deal to Putin far outweigh the inconvenience to his public. He has secured a six-month temporary general licence from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) to facilitate the physical flows of the diesel deal and, even more importantly, appears to have brought Trump on side to protect the agreement.
In fact, shortly after the diesel deal had been done, Trump told Kyiv, “Don’t hit the [Russian] refineries because that’s a world problem”, despite this being a key part of Ukraine’s strategy to degrade Russia’s finances so that it can no longer keep fighting. He followed this by targeting Volodymyr Zelenskyy directly, warning: “He better damn well stop”, while effectively blaming Ukraine for the USD6+ per gallon of diesel price spike hitting American truckers, farmers and ranchers. After Zelensky’s criticism of the deal with Russia, Trump said he thought it was “time for Ukraine to get a new president”.
Zelensky has since stated that Ukrainian military officials were told by their U.S. counterparts that, “if you will not stop [the energy strikes], we will block intelligence.” Following the resumption of Ukrainian strikes on Russian refineries, after Moscow had broken the Trump-called ‘energy ceasefire’ between the two countries with 76 major strikes on Ukraine’s energy infrastructure, Kyiv reported that SpaceX suddenly implemented an unannounced 100 mph (160 km/h) speed limit on moving Starshield terminals. This effectively blinded Ukraine’s high-speed automated air-defence interceptor drones mid-mission, preventing it from stopping a massive, deadly wave of Russian ballistic missiles and drones launched against Ukrainian cities.
However, there is another side to the story. The U.S. administration has argued that the breaching of the psychologically important USD6 per gallon level on diesel pricing threatened to trigger a massive secondary wave of food and consumer goods inflation, as transportation surcharges spiked. Consequently, the announcement of the diesel deal by the President could be seen as a nod to Wall Street that he is aware of this danger and is making moves to avoid it, and as an acknowledgement to the U.S. people that he knows there is a problem and is actively working on its resolution. As it happens, the market reaction to the deal was muted initially, with just a 0.5 percent dip in paper futures on the Monday immediately following the October 9 statement. Since then, U.S. retail diesel prices have remained significantly above the key USD6 per gallon psychological level. Instead, traders have focused on the low probability of the expected diesel ever arriving from Russia, the relatively meaningless volumes involved, and the uncertainty over the future of the U.S./Israel-Iran war.
Another consideration reflected in the diesel deal may well have been that although it was framed as ‘America First’, the diesel situation in some parts of Europe could have become critical quite quickly if Trump had moved ahead with his earlier idea of banning all U.S. diesel exports. For example, the UK’s emergency diesel reserves currently stand at just 42 days, and Europe broadly switched its energy reliance after Russia invaded Ukraine on 24 February 2022 to Washington from Moscow, as analysed in full in my latest book on the new global oil market order. Consequently, there were frantic calls from European leaders to the White House over the prospect of Trump banning all diesel exports and holding the stock in country, which was thought by some to have a price-lowering effect. In reality, though, the U.S. does not have enough physical storage capacity to hold its excess diesel.
Finally, the administration might well argue that this diesel deal does not mark some sort of win for Putin, but is rather a pragmatic application of the ‘Price Cap’ philosophy that has been seen in Europe’s phase-out plan for Russian oil, natural gas and LNG by end-2027, as detailed by OilPrice.com. The White House knows banning Russian oil, gas and refined petroleum products does not stop them from flowing; it just reroutes them through India or China, allowing middlemen to pocket massive refining premiums while Western consumers pay the bill. Therefore, by granting a formal, temporary U.S. Treasury licence, Washington legalises the trade temporarily, and most likely forces Moscow to sell diesel at a steep discount. Moreover, the cash stream generated for Russia would be tightly monitored by the U.S. banking system, as the West receives the actual physical fuel it needs to help stabilise the global supply chain.
That said, only the 3 November mid-term election results will show whether Trump’s diesel deal gamble has paid off for him economically and politically. Morally, only God will be the judge.
By Simon Watkins for Oilprice.com
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