Trump's Russian diesel deal unravels as tankers turn away from US

Two of three tankers carrying Russian diesel to the US under Donald Trump's diesel deal with Vladimir Putin have turned away with no buyers, the Financial Times reported on November 5.

The Hong Kong-owned Leruo switched its destination to Brazil on November 2. The Talisman left the Atlantic for the Mediterranean and is off Algeria signalling "for orders", the shipping term for a cargo with no confirmed buyer or port. The third ship, the Greek-owned Agioi Fanendes, is still heading west towards New York with about 40,000 tonnes, but it has also switched to "for orders". Tracking by maritime data firm Windward shows the same moves.

"Two of the three Russian diesel cargoes bound for the US have now diverted to other destinations," Matt Smith of ship tracker Kpler told the paper, adding that it would be no surprise if the third dropped its US call as well, given the caution of American buyers over legal, regulatory and sanctions risks.

It is yet another Trump policy failure: a big controversy and no result. The US president announced the diesel deal after an October 9 call with Putin, wanting cheaper fuel before the November 3 midterm elections. Ukrainian President Volodymyr Zelenskiy called it a "weak decision by strong partners" and lawmakers from both US parties attacked it, while Trump went on to waive the hellish sanctions of the Graham Act on October 16. Average US pump diesel, $6.199 a gallon on October 5, was $6.292 on November 2, according to the US Energy Information Administration. Democrats then won both chambers of Congress.

A 30-day US licence for Russian oil at sea in March also failed to cool prices, with Brent settling above $100 a barrel, as Trump's "energy dominance" strategy faltered under the Iran war. Moscow loses little this time: diesel that cannot land in New York can still sell in Brazil, which resumed buying along with Turkey within days of the deal.

US buyers have shied away from the legal risk. The Treasury's General License 135 authorises the sale and import of Russian diesel until April 7, 2027, but the 2022 Ending Importation of Russian Oil Act still bans the imports and Congress has not repealed it. The Treasury says the trade is legal. Potential buyers were offered steep discounts but met "a wall of resistance based on reputation and legal risks", Rapidan Energy Group said in a client note reported by Maritime Executive on October 29.

"The President may have given a license to facilitate this transaction, but only Congress can make it legally valid," Senator Richard Blumenthal wrote on October 27 to the manager of the Agioi Fanendes. New Jersey Governor Mikie Sherrill then wrote on November 2 to port and terminal operators in her state, home to all the petroleum terminals in the Port of New York and New Jersey.

"Any effort to profit from the illegal trade in Russian fuel will be met with harsh penalties. I urge you to turn away any tanker that seeks to use your facilities in furtherance of such unlawful activity," she wrote.

A licence with five months to run gives thin cover to a buyer who would face a Democratic Congress from January. The next test is the Agioi Fanendes, due in New York around November 7. The sanctioned tanker Beast loaded at the Baltic port of Primorsk on October 27 and is signalling "Atlantic", the Financial Times reported.

Short of diesel into 2027

The shortage will outlast the deal. The diesel crunch could run well into 2027, Tsvetana Paraskova wrote in OilPrice on November 3. The market balance "will remain tight well into 2027 and is dependent on a recovery of product supply from the Middle East", the International Energy Agency said in its October Oil Market Report, warning that otherwise "further demand reductions and the heavy economic costs these will entail may be needed to balance markets". It sees a return to surplus in 1Q27 but no rebuilding of lost stocks before 2H27.

Morgan Stanley expects planned refinery downtime to peak at 3.4mn barrels a day (b/d) in 2Q27, as plants take the maintenance they deferred this year, Bloomberg reported on its October 20 note. That is two and a half times the usual spring outage and more than the capacity now offline in the Middle East and Russia.

Global gasoil and diesel exports averaged 4.7mn b/d in the first nine months of 2026, 10% less than a year earlier, the IEA said, and combined net exports from the Middle East and Russia fell by 1.3mn b/d to 820,000 b/d in September. Wholesale diesel hit about $220 a barrel in Europe and the US that month. Singapore gasoil was still $168.62/b on October 30, 84% above its level on February 27, the day before the Iran war began, Reuters columnist Clyde Russell reported. US distillate stocks fell to 99.3mn barrels in the week to October 30, the lowest since May 2003.

In the Strait of Hormuz crude has largely come back and refined fuel has not. Asia imported 26.39mn b/d of crude in October against a pre-war average of 27mn b/d, but 6.15mn b/d of light and middle distillates against 6.85mn b/d, Kpler data cited by Russell show. Distillates from the Middle East were 18.4% short at 1.69mn b/d. Total oil flows through the chokepoints reached 10.9mn b/d in September, but Middle East product shipments of 1.9mn b/d were well below half their pre-war level, according to the IEA.

About 2.4mn b/d of Gulf refining capacity went offline after attacks on some 20 refineries, the Center on Global Energy Policy at Columbia University estimates, and ship-to-ship transfers of flammable fuel are far more dangerous than moving crude, according to Paraskova. The route is getting no safer: Iran's Revolutionary Guards said three more tankers caught fire on sea mines on November 3, after 11 in the previous nine days.

Russia's problem is less sanctions than drones. Russian gasoil output and exports have slumped because of Ukrainian damage to refineries, the IEA said, so easing Moscow's export restrictions is unlikely to change the balance much, as the constraint is working refinery capacity. Diesel and gasoil exports fell to 190,000 b/d in 3Q26 from 850,000 b/d in 1Q26, according to Vortexa. Deputy Prime Minister Alexander Novak put producers' exports at 510,000 tonnes in October and about 2.15mn tonnes in November, and said a partial ban would be extended to the end of January 2027, Kommersant reported on October 30.

Sanctions decide where those barrels go. EU and UK embargoes on Russian fuel remain in force, which leaves Turkey, Brazil and Morocco as the main buyers. A Russian cargo sold in Brazil still adds to world supply, the one defence left for the deal. "If Russia can bring additional diesel to the market and export it, it would benefit American consumers," Energy Secretary Chris Wright told CNN on October 18. The other swing supplier is Beijing. "China remains the main Asian uncertainty," Abhishek Kumar, senior oil market analyst at Sparta Commodities, said in late October, with November diesel and jet export volumes still unclear.

Even if all three ships had landed, the US would have been little better off. Their 924,000 barrels equal about a third of one day's diesel use by US transport, Kpler data showed in late October, against Trump's promise of 300,000 tonnes immediately and 500,000 tonnes in November.