Biden Wants to Be Tough With Russia and Iran—but Wants Low Gas Prices Too…
“Softer-than-expected sanctions on major oil producers frustrate some Treasury Department staffers…
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Workart by Germán & Co. creates functional and creative artistic pieces to enhance any space.Treasury Department sanctions against Russia this month left the country’s oil industry largely untouched.
The Wall Street Journal article by Anna Hirtenstein, Joe Wallace, Ian Talley, and Costas Paris, dated June 26, 2024, provides insights into current events.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 producers:
Note: Data cover exports by seaSource: KplerDiscount on price of Russian crude:
Note: The disparity between Urals crude prices and the Brent benchmark, alongside the Russia-Iran-Venezuela axis, in 2023 is '240.510.152.025, amounting to 30 million metric tons.
U.S. steps upenforcement Sanctions take effect2023'24-45-40-35-30-25-20-15-$10a barrel Source: Argus Media 
The image is credited to Germán & Co via Shutterstock.“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.
The White House says President Biden wants to ensure U.S. consumers have the lowest possible gas prices.
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.
When the Treasury imposed sanctions on Russia’s state tanker owner, Sovcomflot, it also issued licenses exempting all but 14 of the company’s fleet, which data provider Kpler estimates totals 91 ships. Industry players said the exemption licenses were a green light to oil traders to do business with those ships, minimizing the risk that they would be targeted by future sanctions.
The National Economic Council, led by Lael Brainard, and others within the administration worried that broader measures would lead to logistical problems in the oil market and boost inflation, said people familiar with the matter. Rising oil output from sanctioned countries is one reason crude prices have fallen from their highs earlier this year, analysts said.
An oil tanker moored in Russia. PHOTO: ASSOCIATED PRESS
In another example of the collision of foreign and energy policies, earlier this year, Washington asked Ukraine to stop attacking some Russian refineries with drones after the damage rattled global diesel and gasoline markets.
The average price of a gallon of gasoline was $3.44 earlier this week, around the same level as a year ago, but substantially higher than four years ago, according to data from the U.S. Energy Administration.
The Iranian sanctions announced Tuesday target companies in the United Arab Emirates and Hong Kong that facilitate payments for Iranian crude. They aren’t expected to have a tangible impact on oil markets, according to Homayoun Falakshahi, an oil analyst at Kpler.
“It will be limited and temporary,” he said. “It’s a question of forming new shell companies and rearranging the supply chain.”
In the case of Venezuela, the U.S. rolled back sanctions last year on the condition of fair democratic elections. Tapping the country’s reserves was suddenly a possibility again for Western oil producers. The country’s crude exports have risen 5% so far this year, according to Kpler data.
The U.S. later didn’t renew a general license for companies to operate in Venezuela after the country’s highest court in January upheld a ban on the candidacy of an opposition leader.
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Oil-diplomacy efforts have been particularly intense in Iraq…
Yet in recent weeks, officials have approached large commodity traders to apply for special licenses to ship Venezuelan oil and approved individual applications, according to administration officials and executives at major commodity trading houses.
“Nothing terrifies an American president more than a gasoline-pump price spike,” said Bob McNally, president of consulting firm Rapidan Energy Group and former White House policy official under George W. Bush. “They will go to great lengths to prevent this, especially in an election year.”
Elsewhere, American oil-diplomacy efforts have been particularly intense in Iraq. Last month, a State Department delegation visited Erbil, a city in the northern Kurdistan region, to try to reopen a pipeline that connects the oil-rich area to a Turkish port. A political dispute among Turkey, Iraq and the semiautonomous Kurdistan region has blocked the pipe since early 2023.
The pipeline “is an energy asset the United States very much wishes to see brought back online,” said Geoffrey Pyatt, the State Department’s assistant secretary for energy resources, in a briefing in March. “Global, and especially European, markets are hungry for non-Russian sources of supply.”
The oil in the pipeline isn’t Russian. But the pipeline itself is 60% owned by state-controlled Rosneft Oil, and the company earns fees when crude flows through it. Late last year, Rosneft sent a group of traders to Kurdistan on a similar assignment.
Its yearlong closure has meant that the Moscow-based company has missed out on more than $720 million of revenue, according to a person familiar with the project.
Etibar Eyyub, the Azeri trader who operates the Russian oil-trading network, traveled to the Kurdish capital of Erbil by private jet last fall with his business partner, Tahir Garayev. They were there to discuss the pipeline with senior Kurdish officials, said people familiar with the matter. Eyyub returned this spring for more talks, some of them said.
A Rosneft spokesperson didn’t comment on the pipeline but said it has become common practice for the Journal to send “biased enquiries.”
Tuesday’s sanctions against Iran affect only a small amount of the country’s oil exports.
After the publication of this article, Eyyub said in a statement that he doesn’t represent Rosneft and didn’t attend meetings with Kurdish government officials.
Garayev said in a statement after the publication of this article that he didn’t attend the meetings and is “no longer involved in any businesses in oil and gas or other industries.”
It is clear what the U.S. position is, Safeen Dizayee, the Kurdish foreign minister, said in an interview. The pipeline was built before there was a conflict and “it is not about supporting one side or another,” he said, referring to Ukraine and Russia.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com, Joe Wallace at joe.wallace@wsj.com, Ian Talley at Ian.Talley@wsj.com and Costas Paris at costas.paris@wsj.com
Corrections & Amplifications
Treasury Department sanctions against Russia this month left the country’s oil industry largely untouched. A caption in an earlier version of this article incorrectly said Treasury Department sanctions against Russia last month left the country’s oil industry largely untouched. (Corrected on June 26)