Energy Sanctions and the Implications of Lifting Them: Some Thoughts

        The international community has existing sanctions on Russian and Iranian oil & gas. Both sources make up a significant amount of the total oil & gas on the market. While the two countries have still been able to sell their products at discounted prices to willing buyers, namely India and China, they make less profit, and there is less product on the market due to less profit to invest in increasing production. India and China have benefited economically from the arrangement without much scrutiny until the sanctions-leveling parties confronted them. When Russia invaded Ukraine and sanctions were leveled, it was widely acknowledged that there would be buyers since taking that much product off the market would destabilize it and make prices rise precipitously. It was also acknowledged that it would take time for the oil and gas to be replaced on the market. Thus, the sanctions were not enforced very much. In recent months, beginning with actions in Venezuela in January 2026, sanctions began to be enforced more heavily. Trump also made some sort of agreement with India for them to phase down purchases of sanctioned oil. Then the Iran War erupted, and for 30-days Russia was given a sanctions waiver to sell at the current elevated value its sanctioned oil that was already in tankers in the ocean. That waiver was lifted, then reinstated for another 30 days with the goal of helping to stabilize markets.

     People have criticized the effects of sanctions, saying they generally don’t work and end up hurting the people rather than the target government. There is some truth to this. They often only partially work, and they often negatively affect the population. Like it or not, economic pressure via sanctions is a tool that will continue to be used, however imperfect it is. 

     The Trump administration has just this year employed three blockades on oil and fuel. The first one was on Venezuela, the next on Cuba, and the third on the Strait of Hormuz. This is another form of economic pressure. In the case of Cuba, some have argued that it is a bad idea on humanitarian grounds. I agree with them in this case, as there are more humane ways to pressure a country than to starve it of needed energy. Fortunately, they have relented and allowed Russian fuel to be delivered. I think that they should have instead been more proactive and permitted fuel deliveries from Mexico, a friendly country, rather than Russia, an adversary that is also sanctioned. Mexico argued that it should deliver fuel to Cuba, but the Trump administration allowed the Russians to be proactive by semi-provocatively trying to challenge the blockade. Perhaps, with the need for more fuel on the market due to Iran, Trump essentially relented to weak Russian pressure and allowed Russian fuel to be delivered. Of course, Ukraine has been justifiably sore at Russia being allowed to sell oil and gas at good prices so that they can better fund their offensive war. Meanwhile, the Ukrainians have been pounding Russian oil & gas infrastructure, including refineries, affecting fuel availability and volumes able to be sold. In a sense, Ukraine is offsetting some of that extra profit Russia would be making and slightly supporting higher oil & gas prices.

     The Russians probably expect the lifting of all energy sanctions if an agreeable peace to their war is established, and the Iranians are arguing for sanctions relief in exchange for slowing their nuclear ambitions. I doubt that full sanctions relief is really on the table for either country. Both countries are so far away from international norms in terms of behavior, criminality, militarism, and terroristic activities that I would think only partial or phased-out sanctions relief is currently morally feasible, and only if peace is agreed. I do invoke morality here, as an aspect of justice and law, and as a nod to the human sense of fairness.

     The effects of lifting sanctions will likely be to flood the markets with more products, which should lower prices. It could also eventually bring more countries to join or rejoin OPEC as a means to keep pricing profitable. The opposite has been happening with the UAE leaving OPEC, no doubt prompted by the damage to its industry by Iranian missiles and drones.

     The U.S. has benefited from the lifting of sanctions against Venezuela as more of its oil has been diverted to U.S. refineries, well-equipped to refine it, and has helped keep U.S. gasoline and diesel prices lower than they could have been.

     Some have noted that the current scarcity of oil and gas on the market is a cue to advance energy security by investing more in renewables. The high oil & gas prices make such investments more desirable as well. I would argue, however, that the issue of scarcity on the market is likely to be temporary as the Iran War is resolved and commerce resumes through the Strait of Hormuz. This means that the high prices are likely temporary, although it has been acknowledged that they will likely linger for some months afterward. The scarcity on the market is also temporary, so the argument for increasing energy security through renewables is basically the same argument it was before the disruptions. A better argument for renewables development would be low oil & gas prices, since that would make more funds available to invest in less profitable renewables. And don't forget, while renewables do offer some energy security against villains like Russia and Iran, they also increase dependency on China for minerals, minerals processing, magnets, and other components.