Biden Wants to Be Tough With Russia and Iran—But Wants Low Gas Prices Too

Wall Street Journal-June26th2024

The Biden administration wants to keep gas prices stable ahead of the election by encouraging oil to flow into global markets. The effort has run square into another priority: being tough on adversaries Russia, Iran and Venezuela.

The policy has led to softer-than-expected sanctions on major oil producers, according to diplomats, former government officials and energy-industry players briefed by current officials.

A case in point arrived on Tuesday, when the U.S. levied fresh sanctions against Iran. The measures affect a fraction of the country’s oil exports and are unlikely to gum up global markets, analysts said.

Monthly crude exports by sanctioned producersSource: KplerNote: Data cover exports by sea

RussiaIranVenezuela2023’24051015202530million metric tons

Discount on price of Russian crudeSource: Argus MediaNote: Gap between Urals crude prices and Brent benchmark

U.S. steps upenforcementSanctions takeeffect2023’24-45-40-35-30-25-20-15-$10a barrel

“The president has wanted to do everything that he could to make sure that American consumers have the lowest price possible at the pump, as it affects families’ daily lives,” said a senior administration official.

Though tensions between Iran and the U.S. have ratcheted up since the Oct. 7 attacks on Israel by Tehran-backed Hamas, exports from Iran surpassed 1.5 million barrels a day this year starting in February, substantially more than at the start of the Biden presidency. Most of that oil is bought by small Chinese refineries at discounted prices.

The U.S. and its allies have been “very, very careful not to go too far and damage the ability of Western economies to function,” when it comes to sanctions, said John Smith, partner at Morrison Foerster and former head of the U.S. Treasury Department’s Office of Foreign Assets Control.

U.S. diplomats and energy officials have for decades worked around the globe to keep oil flowing, often involving uncomfortable alliances and accommodations.

When the Treasury department hit Moscow with a wave of sanctions on June 12 over the Ukraine war, it targeted banks but left the country’s oil industry largely untouched.

There is frustration among some staffers in the U.S. Treasury Department over the lack of action against oil-trading networks that ferry Russian and Iranian oil, including one that officials are currently investigating, according to U.S. diplomats and some of the energy-industry players briefed by current officials.

The network is operated by a little-known trader from Azerbaijan who emerged as the premier middleman for Russia’s Rosneft Oil, The Wall Street Journal reported.

Supporters of the policy within the administration said the moves are finely balanced to keep prices low, but throw sand in the gears of Russia and Iran’s oil export machines, meaning they earn less from each barrel of oil they sell.

“Our two goals, which are lowering costs for the American people and lowering profits for the Kremlin, are very much aligned with each other,” a senior Treasury official said.