Donald Trump has described his diesel agreement with Vladimir Putin as a triumph. It certainly is — for Putin.
The Russian leader won an American sanctions concession without withdrawing a soldier, suspending attacks on Ukrainian civilians or offering a single meaningful concession toward peace. In return, Trump got the promise of enough diesel to barely register in global markets.
Then on Friday he blocked numerous sanctions on Russia passed by the US Congress, prompting outrage among lawmakers including Republicans who called it “reckless”, “beyond irresponsible” and “unconscionable”.
Over the weekend Trump attempted to defend his decisions, claiming he was “in the process of negotiating peace in the war between Russia and Ukraine” and did not want to drive Russia away. He claimed on Sunday that he was making “great progress” in a peace deal.
But the reality is, this is a remarkably one-sided bargain. I was deputy finance minister of Russia in the 1990s and later first deputy chairman of the Central Bank of Russia. Inside the Kremlin they will be celebrating. The fact of the matter is that the White House has managed to turn Russia’s damaged refineries into a reason to reward the Kremlin.
On 9 October, Washington authorised transactions in Russian diesel through to early April. Trump announced an initial 1.8 million metric tonnes: 300,000 in October, 500,000 in November and one million thereafter. He also floated another three million tonnes, contingent on the condition of Russia’s refineries. The sanctions relief is real and immediate. The extra fuel is prospective — and far less impressive than the presidential fanfare suggests.
The world consumes roughly 120 million tonnes of diesel each month. Even assuming every promised shipment represents additional supply, the initial volumes amount to about 0.25 per cent of monthly consumption in October, 0.4 per cent in November and 0.83 per cent in December. These are rounding errors, not an energy revolution. American truckers and farmers are unlikely to notice much difference at the pump.
Nor is this a financial jackpot for the Kremlin. Russia produces far more diesel than it consumes. Although Moscow curbed exports this summer, major refiners had secured exceptions by September – Russia lacked storage space for their surplus. The relevant gain from Trump’s deal isn’t the full sales price but any premium over what Russian exporters could already earn elsewhere. Even if that premium were $650 to $700 (£487 to £525) a tonne, the first 1.8 million tonnes would bring at most $1.25bn (£940m) in additional export revenue over three months.
That assumes American buyers generously surrender the entire premium rather than pocketing some themselves. Against Russia’s $43bn (£32bn) in monthly commodity exports, the gain would amount to less than 1 per cent over three months. Additional federal corporate-tax receipts might be less than $30m (£22m) a month, or under 0.07 per cent of recent federal revenue — hardly a windfall that could change the course of the war.
The larger economic story runs in the opposite direction: Ukraine has been making Russia pay for invading it. Strikes on refineries reduced operational capacity by roughly 25 per cent at their July peak – the disruption is now closer to 12 per cent to 15 per cent. By my estimates, Russia lost 6-6.5 million tonnes of diesel exports between May and September, worth $4.2bn to $4.5bn (£3.1bn to £3,3bn) at prevailing prices.
Those losses won’t force Putin to stop fighting. Russia will keep financing the war, even if it must squeeze civilian spending and tolerate bigger deficits. But refinery attacks impose a cost that sanctions alone cannot.
If those attacks stopped and Russian refining fully recovered, export earnings from diesel and gasoline could rise by $1.1bn to $1.2bn (£830m to £890m) a month. Some increase in oil production could eventually add another $260m to $280m (£195m to £210m) to monthly federal revenue.
Ukraine’s President, Volodymyr Zelensky, has said Kyiv will continue to strike Russian refineries after he abandoned Trump’s abrupt “energy ceasefire” in response to Moscow’s continued attacks on its infrastructure. Trump has called Ukraine’s resumed strikes “a disgrace” and continued to criticise Zelensky. This week, the Pentagon appears to have suddenly implemented speed limits on US-owned Starshield satellite terminals that are vital to the Ukrainian war effort. There are fears of similar action ahead. And that is the real prize Moscow would like to extract from Washington: pressure on Ukraine to stop hitting Russian energy infrastructure.
The Kremlin understands the political value of the diesel deal perfectly. It weakens Western unity and establishes a precedent for peeling back sanctions without any reciprocal Russian steps. On Wednesday, Putin envoy Kirill Dmitriev was already talking about this agreement as a model for broader US-Russia economic co-operation.
The US administration can reasonably want lower diesel prices. But a competent negotiation ought to obtain something in return for a strategic concession. This one offers no discernible breakthrough for peace and little prospect of meaningful relief for consumers.
Putin got what he wanted immediately. Trump got to announce what Americans may never feel. Russia offered diesel – the United States surrendered leverage. Calling that a victory is not merely wishful thinking. It is an embarrassment.
Sergey Aleksashenko is an expert on the economies of Russia and Ukraine who leads NEST Centre’s research on economic issues. He served as deputy minister of finance in Russia from May 1993 to March 1995 and as first deputy chairman and board member of the Central Bank of Russia from December 1995 to October 1998. He left Russia as a political refugee in 2014 and subsequently served as an adviser to Ukraine‘s prime minister, minister of finance and chairman of the National Bank of Ukraine