Russian Diesel Cargoes Face U.S. Legal and Market Uncertainty

The Talisman and the Sierra Leone-flagged Leruo left Primorsk in October, initially listing destinations on the U.S. East Coast. By November 5, Leruo was indicating Brazil, while Talisman had entered the Mediterranean. AFP reported that Talisman passed through the Strait of Gibraltar on November 2, before the U.S. midterm elections. The Malta-flagged Agioi Fanendes was listed underway in the North Atlantic without a destination on November 9. CNN reported it carried about 300,000 barrels and had slowed in recent days. Kpler analyst Matt Smith said prospective U.S. buyers’ concern about legal consequences was driving uncertainty around the cargoes.

President Donald Trump announced the agreement on October 9, saying Russia would make more than 300,000 metric tonnes of diesel available immediately to U.S. and global markets, followed by 500,000 tonnes in November and another 1 million tonnes thereafter. The volumes were not reserved solely for American buyers. Reuters identified Agioi Fanendes as carrying about 40,000 tonnes loaded at Primorsk on October 22. On Monday, Deputy Foreign Minister Alexander Pankin called the agreement a possible basis for gradually restoring business ties with Washington, Reuters reported, though the practical arrangements remain unclear.

The Treasury Department’s Office of Foreign Assets Control issued License No. 135, authorizing covered transactions involving the sale, delivery, offloading and importation of Russian-origin diesel, including into the United States, through April 7 next year. But a 2022 law bars imports of Russian products classified under Chapter 27 of the U.S. tariff schedule, which includes diesel. Ending that prohibition requires presidential certification on Russia’s withdrawal of forces and cessation of hostilities under terms accepted by Ukraine, the absence of an immediate military threat to a NATO member, and recognition of Ukrainians’ right to choose their government. The law also requires congressional consultations and a report at least 45 days before certification; termination takes effect 90 days later unless Congress passes a joint resolution of disapproval.

Lawfare’s analysis says the statutory restrictions appear to remain in force, while questioning whether the administration can rely on language concerning implementation measures under the original executive order to support the new license. Treasury says its authorization complies with applicable law. The Associated Press reported on November 5 that no court had ruled on the dispute.

New Jersey Governor Mikie Sherrill urged port and terminal operators to reject the cargoes. In a November 2 letter, she warned that buying or unloading Russian fuel could bring civil and criminal penalties, and pledged to use state powers to stop facilities from enabling imports she considers unlawful. A bipartisan group of lawmakers, including Senator Jeanne Shaheen, Republican Senator Thom Tillis and Representative Gregory Meeks, separately warned banks, port authorities and fuel distributors of potential legal action, congressional investigations and liability. They also demanded that records concerning proposed or completed imports be preserved. JPMorgan Chase, Bank of America and Citigroup were among the recipients.

The legal dispute unfolds amid tight U.S. diesel supplies. AAA put the national average retail price at $6.17 a gallon on November 9, down from $6.29 a week earlier but near September’s record of $6.53. Distillate inventories, including diesel and heating oil, fell 3.6 million barrels to 99.3 million barrels in the week ended October 30, about 13% below the five-year seasonal average. With winter heating demand approaching, the Russian cargoes’ route to U.S. consumers remains uncertain.