At the battle of Alesia in 52 BCE, Julius Caesar encircled a key hill-fort in today’s eastern France, while himself being besieged by a larger Gallic relief force. The leaders of the current wars of oil blockades and sanctions lack Caesar’s genius, but they have created an even more confusing tangle of mutual encirclements.
Iran has impeded most traffic into or out of the Gulf, while trying to impose permanent control over transit through the Strait of Hormuz. The US had sanctioned Iran’s oil long before the war, then relaxed the sanctions to allow India to buy some even after launching its attack, but next imposed a physical blockade.
Since Russia’s full-scale invasion of Ukraine in February 2022, the EU, UK and US inched forward on progressively tighter sanctions on purchases and shipments of Russian oil, which, however, did not prevent it from going to other countries such as China and India.
As of January, the EU outlawed imports of refined products, such as diesel, petrol and jet fuel, made from Russian crude oil in third countries – to close a loophole taken advantage of by India and Turkey.
In a more physical campaign, Ukraine has launched increasingly effective strikes against Russian petroleum facilities and loading ports. Nearly all refineries in central Russia have had to stop or reduce operations in the past few days.
Shipments of refined products were down almost 10 per cent last month versus March, and the country has banned petrol exports until the end of July. Crude exports have seen the hardest blow, just 2.78 million bpd so far this month, against 4.47 million bpd last month. The economic siege combined with a series of battlefield setbacks for Moscow against an increasingly capable enemy.
But now relief seems to be on the way – and not from Russia’s allies, but its notional opponents. The major oil price rise since the start of the war in the Gulf already more than compensated for lower export volumes. The price of Urals, Russia’s main crude grade, is up 67 per cent on the same period last year.
On March 13, the US issued a 30-day waiver for sanctions on Russian oil already at sea. This was intended to loosen the squeeze on the market caused by the closure of Hormuz. But it seemed likely even then that this marked the effective death of the sanctions, at least as long as the conflict in the Gulf goes on.
Indeed, last Monday, US Treasury Secretary Scott Bessent announced he would extend the waiver for another 30 days. Meanwhile, US President Donald Trump continues to scramble for a diplomatic solution to re-open the strait, but with the serious risk of affirming Iran’s control.
Mr Trump’s imposition of tariffs on India in August drove down its imports of Russian oil sharply, from about 1.8 million bpd to 1 million bpd by early this year. But the relaxation of sanctions, and India’s desperate need to replace Gulf oil, has sent its purchases of Russian oil soaring again, to a near-record 1.95 million bpd this month. In early May, energy-short Japan bought its first shipment of Russian crude since last summer, having mostly suspended purchases since the invasion of Ukraine.
The UK has been much more steadfast in its support for Ukraine than has Washington. But from last Wednesday, it announced that it was watering down its own sanctions. It had banned the import of fuels made by third parties using Russian crude, like the EU earlier, as of May 20. But, at the same time, in the face of high prices and fears of physical shortages, it has unexpectedly exempted jet fuel and diesel.
This looks worryingly like a panic measure. The government will provide four months’ notice of any end to this waiver. It will anyway be in force for at least three months, so that means the relaxation of sanctions is likely to remain at least until the end of this year.
The UK does import more than two-thirds of its jet fuel, and the government was no doubt wary of bad headlines as the summer holiday period approaches. Before the war in the Gulf, about 323,000 bpd of jet fuel was exported through Hormuz, nearly all of it destined for Europe, including the UK.
Britain had 18 refineries in the 1970s, six at late as last year, and only four today. These closures were not particularly because of “net zero” carbon policies, as anti-environmental groups complain, but more because of high energy costs and structural declines in oil consumption. However, the lack of refining capacity does expose the island nation to the vagaries of international markets.
Jet fuel and diesel, known as “middle distillates”, are particularly exposed to the crisis. Medium-gravity crudes from the Middle East and Russia produce high middle distillate yields, and the sophisticated new Gulf refineries of recent years are designed to make high-specification diesel for European markets. US shale oil production, by contrast, is much lighter, and better-suited to make petrol and naphtha, a petrochemical feedstock.
But it is unlikely there will be any physical shortages of jet fuel in the UK. Airlines and their passengers who are willing to pay much higher fuel and ticket charges will still be able to fly. Refineries have the flexibility to adjust output to make more jet fuel, at the expense of diesel or even petrol. American refineries are already jet-maxxing. Shuffling supplies from India to the UK will not reduce prices.
For now, the EU is sticking to its sanctions. That is aided by the ousting of the Kremlin’s fifth column within the bloc, Hungary’s prime minister Viktor Orban, in elections last month.
Yet London’s backing down at the first sign of trouble sends a bad signal about Western unity to maintain stiff measures against Moscow. It will not have much practical impact on the volume or revenue of Russia’s petroleum sales. It does reveal political timidity, and, though British prime minister Sir Keir Starmer sought to reassure President Volodymyr Zelenskyy on a call, it has dismayed the Ukrainians.
When Caesar’s outer defences at Alesia faltered, he personally led his soldiers into battle, wearing his distinctive scarlet cloak, and sealed the breach. The Western leaders trying to manage this energy crisis could do with some of his strategic genius and courage.
