Trump's Russia diesel deal may offer Putin more than money — and spell trouble for Ukraine

Ukraine is facing increasing uncertainty over its ability to sustain the war against Russia as a series of moves by U.S. President Donald Trump has raised fresh questions about Washington's reliability as Kyiv's most important military partner.

Trump's agreement with Putin to ease sanctions for Russia to provide global markets with diesel, as well as restrictions on U.S. intelligence sharing with Ukrainian forces, has put President Volodymyr Zelenskyy in a difficult position as winter looms.

Higher diesel prices – essential to transporting goods and agricultural production – tend to drive up costs across the wider economy and fuel inflation. With November's U.S. midterm elections approaching, Trump is under pressure to bring fuel costs down.

But experts told CNBC that the diesel deal would deliver only a marginal financial benefit to Russia, and not move the needle much on global energy prices. Its wider political implications may be more significant, potentially reinforcing the Kremlin's belief that it can secure concessions from Washington without making compromises over Ukraine.

"Russia's main gain is political: Trump's decision eases sanctions pressure and undermines Western unity," Sergey Aleksashenko, senior research fellow and head of economics at the NEST Centre, told CNBC. 

Trump's agreement with Putin was for Russia to supply the global market with 4.8 million metric tons of diesel, the equivalent of about ten days of U.S. domestic demand, or about a single day of global demand. Experts say it will do little to affect prices.

"It does not even touch the sides – it is very, very small," Neil Atkinson, former head of the IEA's oil industry and markets division, told CNBC's "Squawk Box Europe" on Monday.

Aleksashenko estimated that the initial part of the phased agreement that covers 1.8 million metric tons of diesel could generate up to $1.25 billion in additional export revenue over three months, equivalent to around 1% of Russia's commodity export revenues during that period.

However, the benefit to Russia's federal budget would be substantially smaller, at less than $30 million per month, or under 0.07% of monthly federal revenues.

The deal was therefore unlikely to meaningfully strengthen Russia's war finances, Aleksashenko said. Instead, its main benefit to Moscow is political, because it eased sanctions pressure and undermined Western unity without requiring Putin to make concessions over Ukraine, he told CNBC.

The research fellow also argued that the additional Russian diesel entering global markets is not sufficient to produce a noticeable reduction in consumer fuel prices in the short term.

"Funding the war is currently Putin's priority, and he is prepared to increase that funding even if it means cutting all other expenditures," Aleksashenko added, pointing to Russia's draft budget for 2027. 

"Rather than encouraging compromise, the [diesel] deal likely boosts Moscow's belief that continued pressure will eventually yield further Western concessions," Maria Snegovaya, senior fellow at the Center for Strategic and International Studies, told CNBC.

Speaking to reporters in Brussels on Friday, Zelenskyy also warned that the diesel agreement could set a precedent for further sanctions relief, while highlighting Ukraine's continued reliance on U.S. military technology and intelligence despite efforts to develop alternatives. 

"Sanctions will be lifted after gas," Zelenskyy said. "They will be lifted on something else. Then this will come to the banking system, certain individuals, chemical industry."

Earlier this week, reports emerged that SpaceX's Starlink military application Starshield has been restricted in Ukraine. SpaceX CEO Elon Musk said in a post on X that the U.S. government and president were ultimately responsible for any curbs on the network.

The order to limit Starshield for Ukraine came from inside White House, according to a Reuters report citing three officials familiar with the matter. CNBC has contacted the White House for comment.

The consequences were felt sharply in Ukraine. As Starlink's speed limits were lowered, Ukraine became incapable of shooting down some Russian drones. This week, Ukraine also did not receive advanced warning from partners of incoming ballistic missiles, resulting in civilian deaths, according to Ukrainian officials. 

According to Serhiy Derkach, Ukraine's first deputy minister for recovery, infrastructure and transport, Starlink restrictions emboldened Russia to intensify attacks on Ukraine.

"With U.S. limiting the use of Starlinks on the battlefield, Russia feels that this is their moment to try and inflict even more pain and suffering on Ukraine's civilian infrastructure," Derkach told CNBC on Friday. 

Russian authorities didn't respond to multiple CNBC requests for comment.

The diesel deal was a political and moral blow to Ukraine and the Western coalition, according to Snegovaya. The U.S. sanctions exemption, which runs until April 2027, could facilitate Russian diesel exports beyond the initially announced shipment, potentially increasing Moscow's economic gains, she warned.

"If [the] White House uses its military and intelligence support as leverage to constrain Ukraine's strikes, the implications could become far more significant," Snegovaya said, adding that Ukraine's attacks on Russian oil refineries have inflicted substantial economic costs on Moscow.

Such a move could have far greater consequences for Ukraine's efforts to weaken Russia's war economy, she added.

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The diesel deal further undermines Washington's credibility as a mediator in the eyes of Ukraine and its European allies, as it appears to reward Moscow without securing concessions while increasing pressure on Kyiv, she said.

The problem, Snegovaya said, is that achieving military autonomy for Europe and Ukraine is extremely difficult in the short term, and Europe has been slow to develop the necessary capabilities. 

"Almost five years into the war, Ukraine and its European partners remain heavily dependent on the U.S. in critical areas, like intelligence and missile defense. These dependencies are unlikely to be overcome during the remaining years of the Trump administration," she told CNBC.