Bipartisan warning puts banks, ports on notice over Russian diesel

By James Calloway

More than 300,000 metric tons of Russian diesel is the first planned tranche of a U.S. supply arrangement announced by President Donald Trump with Russian President Vladimir Putin on October 9. Trump said 500,000 more tons would follow in November and 1 million tons afterward, with up to 3 million additional tons possible depending on refinery conditions. Russia later confirmed the arrangement.

Treasury’s Office of Foreign Assets Control subsequently issued General License 135, granting a six-month exemption from certain sanctions restrictions.

What did lawmakers ask banks and ports to do?

A bipartisan group of lawmakers warned major U.S. banks, port authorities and fuel-industry groups that Russian diesel imports could violate federal law and expose companies to civil and criminal liability. They also cited national-security concerns because the sales would provide Moscow revenue to finance its war against Ukraine.

The lawmakers wrote: “Any importation of Russian diesel into the US raises significant legal questions and may be subject to legal action, as well as congressional investigations.”

The group includes Democratic Sens. Jeanne Shaheen, Ron Wyden, Sheldon Whitehouse, Chris Coons and Elizabeth Warren; outgoing Republican Sen. Thom Tillis; and Rep. Gregory Meeks, the top Democrat on the House Foreign Affairs Committee.

The lawmakers urged recipients not to facilitate the purchase, transportation, importation, unloading, storage, financing or distribution of Russian-origin diesel until the relevant legal requirements had been met.

• Preserve records of proposed or completed transactions, including contracts, shipping documents, payment records, port reservations and communications with suppliers and U.S. government officials dating back to September 1.
• Confirm by October 28 that preservation measures were in place, and disclose whether they know of any proposed or actual Russian diesel imports.

The letters went to chief executives of major U.S. banks, including Goldman Sachs, and to the port authorities of Houston, Corpus Christi and Beaumont in Texas and New York/New Jersey.

Public reporting and vessel-tracking data cited by the lawmakers indicate that ships carrying Russian diesel could arrive at Beaumont and New York/New Jersey as early as the end of October.

For market participants, the first test is whether banks and ports will handle cargoes while the legal dispute remains open.

Can the Treasury waiver withstand Congress?

The central issue is whether the administration’s licensing action conforms to restrictions established by Congress.

Under the Ending Importation of Russian Oil Act of 2022, U.S. imports of Russian-origin energy products are generally barred unless the president certifies to Congress, after consultation, that Russia has ceased military hostilities in Ukraine, poses no immediate military threat to NATO members and recognizes Ukrainians’ right to choose their government.

The lawmakers also cited Section 216 of the Countering America’s Adversaries Through Sanctions Act, which requires congressional review before certain licensing actions that significantly alter U.S. foreign policy toward Russia. They said the administration had not fulfilled that requirement.

The administration says the action is lawful and consistent with previous decisions by the Office of Foreign Assets Control, which administers U.S. sanctions. Democrats could gain significant investigative powers if they regain one or both chambers in the November midterm elections.

White House spokesperson Taylor Rogers dismissed the initiative as politically motivated, saying Democrats were focused on investigating President Trump rather than improving Americans’ lives.

The letters do not establish that any company has committed a crime. They warn that participation could still trigger legal challenges and investigations despite the administration’s assurance that the waiver is valid.

Representative Jamie Raskin, the top Democrat on the House Judiciary Committee, separately warned major fuel-industry associations that importers could face civil and criminal penalties, including up to 20 years in prison. He argued that Trump’s action could not override statutory prohibitions and that companies could be held accountable under this administration or the next.

The waiver lowers sanctions risk, but it does not settle the statutory challenge or remove potential liability for companies handling the cargoes.

What happens to the cargoes?

The warnings could complicate the administration’s plans even if General License 135 reduces the risk of violating U.S. executive-branch sanctions.

Michael Wain, a senior international trade policy adviser at Akin, told RFE/RL: “General License 135 covers a broad range of Russian diesel transactions and substantially reduces US sanctions risk for foreign firms that stay within its terms.”

He said companies must also consider British, European Union and other jurisdictions’ sanctions rules. The test is whether foreign buyers previously reluctant to handle Russian fuel now feel more comfortable, an outcome he said may be part of the administration’s objective.

Glen Howard, president of the Saratoga Foundation and a longtime Russia strategist, said the letters were significant because they went to each major U.S. bank and would likely freeze efforts to proceed with the sale.

He said the intervention suggested the administration had not adequately considered legal obstacles and strategic implications. He speculated that a small group of advisers made the decision without broad consultation across the administration.

Banks and other intermediaries may also weigh congressional subpoenas, requests to testify and future legal challenges even if they accept the Treasury license.

Rachel Ziemba, a senior fellow at the Center for a New American Security, said the warnings reinforced her view that most Russian diesel cargoes would go outside the United States, describing the intervention as mostly diplomatic theater. She also said the senators’ warnings may give U.S. banks and buyers pause even though the diesel was already en route.

Ziemba said a meaningful increase in diesel supplies would likely require an energy cease-fire, which she said Russia was wary of accepting. She noted that the administration believes its waivers sufficient, but uncertainty can still deter American buyers and financial institutions.

Some cargoes could be resold to other countries in the Americas, where demand for fuel remains strong.

Russia began granting exemptions to its diesel export ban on October 1 to allow shipments under the arrangement. Industry sources put Russian diesel production at about 175,000 tons a day in September, 160,000 in the first half of October, and toward 180,000 after new export quotas were introduced.

The shipments could provide Moscow with additional revenue, but legal uncertainty may deter some U.S. buyers and redirect cargoes to other markets.

The next watch item is October 28, when recipients must confirm record preservation and disclose what they know about imports as cargoes approach U.S. ports.