Treasury’s Sanction Waivers Lift Russian Oil Prospects

The U.S. Treasury has now extended a waiver on Russian seaborne oil sanctions three times since March, with crude trading near $103 a barrel as the closed Strait of Hormuz keeps global supply under pressure.

For energy-exposed investors, the repeated policy reversals introduce pricing uncertainty across oil majors, refiners, and tanker operators while simultaneously raising questions about the long-term enforceability of the sanctions regime underpinning Russia-related risk premiums.

Key Takeaways

Treasury issued General License 134B on April 17, valid through May 16.
A third extension followed May 18, keeping relief in place into June.
U.S. benchmark crude rose roughly 2% to ~$103/bbl on the latest renewal.

Market Reaction & Context

U.S. benchmark crude climbed approximately 2% to around $103 a barrel on May 18 as Treasury Secretary Scott Bessent confirmed the third consecutive monthly extension of the Russian oil waiver ¹. That compares with prices that Bessent himself suggested could have hit $150 a barrel had the waivers not been issued, underscoring the degree to which Russian volumes – small in isolation – are serving as a marginal supply buffer in a Hormuz-disrupted market ¹.

The Strait of Hormuz has remained effectively closed since conflict with Iran began, now approaching its third month, removing a critical transit route for Gulf producers and amplifying the pricing impact of any incremental barrel reaching the market ¹.

Waiver Timeline & Mechanics

The relief was first issued in March as General License 134A, authorising the delivery and sale of Russian crude already loaded on vessels in transit; that license expired April 11 ². Treasury’s Office of Foreign Assets Control published 134B on April 17, covering cargoes loaded as of that date through May 16 – two days after Bessent had publicly ruled out an extension ^2,3.

The May 18 renewal – the third iteration – applies the same vessel-loading logic and explicitly excludes transactions involving Iran, Cuba, and North Korea ³. For shipping companies, commodity traders, and cargo insurers, the rolling 30-day windows create a defined but fragile legal pathway for completing in-transit transactions.

Policy Reversal Risk for Investors

The pattern of announced expiries followed by quiet renewals has generated measurable policy-credibility risk. Bessent said before each of the last two extensions that the waiver would not be renewed, then reversed course days later ¹.

Brett Erickson, managing principal of Obsidian Risk Advisors, said the humanitarian framing Bessent used to justify the first extension left little room to walk back subsequent ones.

“He effectively cited ‘humanitarian reasons’ to justify the extension – we’re now almost a full month longer into the conflict, Hormuz is still closed, and the crisis for many Asian countries has only become exponentially worse. There’s really not another option.” ¹

Geopolitical & Sanctions Architecture Implications

Senate Democrats – including Chuck Schumer, Elizabeth Warren, and Jeanne Shaheen – called the April extension a “180-degree reversal” and warned that temporary waivers translate into additional billions of dollars in revenue for Russia’s war budget ². Vladyslav Vlasiuk, a senior adviser to President Volodymyr Zelenskyy, said Russian oil volumes are too small to meaningfully offset Hormuz disruptions, questioning the economic logic of the concession ².

Separately, Treasury allowed a parallel waiver on Iranian oil to expire in April and has since imposed new sanctions on Chinese “teapot” refineries processing Iranian crude under what Bessent called “Operation Economic Fury” – a simultaneous tightening and loosening that analysts say makes enforcement signalling harder to read ¹.

Outlook

With the Strait of Hormuz showing no near-term signs of reopening, the market base case appears to be a fourth extension in mid-June, though Bessent has again pledged not to renew. Matthew Murray, former deputy assistant secretary of commerce and now an adjunct professor at Columbia and Georgetown universities, framed the approach as a high-stakes balancing act: “The question now is whether President Donald Trump can successfully apply both carrots and sticks.” ²

For deal-focused investors, the key variables to monitor are the duration of Hormuz closure – which Shell USA’s president said could take up to six months to recover from – any shift in OFAC guidance affecting tanker insurance markets, and the trajectory of Russian crude volumes reaching Asian buyers versus being redirected by the license terms.

Not investment advice. For informational purposes only.