US temporarily authorizes purchase of stranded Russian oil to stabilize energy markets

The US Treasury Department announced Thursday it has granted temporary authorization for the purchase of Russian oil currently stranded at sea, as global energy markets grapple with supply disruptions caused by the escalating Iran conflict. According to CNBC, approximately 124 million barrels of Russia-origin oil are currently at sea across 30 locations globally, enough crude to cover roughly five to six days of global supply.

Stranded oil due to Hormuz closure

Treasury Secretary Scott Bessent explained that the Russian oil being purchased is already stranded at sea due to Iran's closure of the strategic Strait of Hormuz, which has disrupted global shipping lanes. He characterized the move as a "narrowly tailored, short-term measure" that applies only to oil already in transit, emphasizing that it will not provide "significant financial benefit to the Russian government" as Moscow collects most energy revenue through extraction taxes.

Price surge prompts emergency measures

Oil prices have spiked dramatically since the Iran war began, nearly doubling from pre-conflict levels of $60-70 per barrel to between $100 and $120 per barrel this week. The temporary authorization, which expires on April 11, represents an emergency response to the price surge that threatens global economic stability. Bessent noted that "the temporary increase in oil prices is a short-term and temporary disruption that will result in a massive benefit to our nation and economy in the long-term."

Sanctions regime temporarily relaxed

The exemption marks a significant departure from existing sanctions on Russian energy exports. Since Russia's 2022 invasion of Ukraine, the G7 and European Union have imposed strict sanctions on Russian oil, including a price cap of $44.10 per barrel. The EU has committed to phasing out all remaining Russian oil imports by 2027, while former President Joe Biden banned imports of Russian oil, liquefied natural gas, and coal into the United States in 2022. Thursday's temporary authorization provides a limited exception to these restrictions as the US seeks to stabilize markets amid the widening Middle East conflict.