Two Russian Diesel Tankers Bound for the U.S. Change Course

Two of the three tankers carrying Russian diesel to the United States have changed course, the Financial Times reported on Wednesday. The shift suggests that U.S. President Donald Trump's energy deal with Russia may have unravelled, while fuel supplies in the United States continue to shrink.

Matt Smith, an analyst at the trade-data firm Kpler, told the newspaper that two of the three Russian diesel cargoes destined for the U.S. have now been sent to other locations. The Hong Kong-owned, Sierra Leone-flagged vessel Leruo reportedly changed its signal to "Brazil." The sanctioned, Russian-flagged Talisman headed for the Mediterranean and signalled "for orders" off the coast of Algeria. Smith suggested the third ship, the Greek-owned Agioi Fanendes, would also divert because of regulatory, legislative and sanction issues.

Legal threats to buyers

American buyers have so far refused to take the Russian cargoes because of legal threats from state and federal officials. New Jersey's Democratic governor, Mikie Sherrill, warned port and terminal operators in the state that they could face fines of millions of dollars for offloading Russian diesel. CNN reported that the U.S. Senate Foreign Relations Committee ordered banks, port operators and companies involved in the deal to preserve documents ahead of oversight inquiries, which are expected once Democrats take control of Congress in January.

Outline of the deal

Trump announced the arrangement after a phone call with Russian President Vladimir Putin last month. He claimed Russia would "immediately" supply 300,000 tons of diesel to the U.S. and global markets, followed by 500,000 metric tons in November and 1 million metric tons after that. The next day, Russia partially lifted its diesel export ban, which had been introduced in the summer because of domestic shortages.

Most experts say the agreement would have little effect on global energy markets in the near term. According to The Guardian's calculations, the first 300,000 tons would cover only three-quarters of the country's daily consumption. Turkey said last month that it had negotiated a share of the Russian diesel under the deal. Ukrainian President Volodymyr Zelensky and European allies criticized the agreement, arguing it would strengthen the Russian economy and strain transatlantic relations.

The deal came as U.S. diesel prices rose by around 70% year-on-year amid turmoil on global oil markets caused by Iran's effective closure of the Strait of Hormuz. Russian Deputy Prime Minister Alexander Novak said last week that at least four diesel tankers had left for export markets.