SCEEUS Quick Comment No. 2, 2026
Washington’s latest moves point to a growing urgency to lower fuel prices ahead of the midterm elections, or at least to shift the blame from their main source in the Gulf onto Ukraine. Europe will need to strengthen its hand with both Washington and Moscow and ensure that any energy ceasefire is balanced.
On 9 October, Donald Trump announced a deal with Vladimir Putin to supply more than 300,000 tonnes of diesel to US and global markets, with larger volumes to follow. In parallel, the US temporarily eased sanctions on Russian diesel sales. Two days later, Trump announced an “energy ceasefire” between Russia and Ukraine, despite no details having been agreed or, apparently, even seen by at least the Ukrainian side.
Reports emerged later the same day that the US proposal was initially for a narrow “refinery-for-refinery” ceasefire, with a broader energy system ceasefire covering attacks on power plants and electricity grids potentially following only later. Further reporting suggested that US officials had been pressuring European and Ukrainian policymakers over the weekend to halt Ukraine’s strikes on Russian energy infrastructure, including threats to cease intelligence sharing and access to US weapons.
A small deal with a bigger purpose
The diesel deal itself is small in economic terms and its likely additional impact on global markets is limited, if not insignificant. Russia will be keen to export as much diesel as it can after prioritizing its domestic market, deal or no deal.
More important is the wider US effort to stop Ukrainian attacks on Russian refineries, of which the diesel deal may be a part. These strikes have become increasingly effective and are a major reason why Russian refined-product exports have fallen from around 3 million barrels per day (mb/d) before the full-scale invasion to around 1 mb/d today. Its diesel exports alone have fallen from around 0.9 mb/d to just 0.1 mb/d.
The main source of high prices
Trump is therefore right that Ukrainian attacks contribute to tight global markets for refined fuels. However, the Russian fuel losses should be seen against total global oil supply of around 100 mb/d, of which roughly 80–85 mb/d is processed in refineries into refined products. The elephant in the room is the war in the Persian Gulf, which has caused a much larger disruption to global oil flows. Gulf oil exports have recovered substantially from an initial collapse of almost 16 mb/d, the largest supply disruption in history, but at high cost and risk amid continued Iranian attacks on tankers and pipelines. The war, and the depleted oil stocks it has left behind, is by far the main reason crude prices remain above $100 per barrel. Refined-product exports from the Gulf have recovered more slowly than crude oil and remain around half of pre-war levels, at 2.3 mb/d in September compared to 4.5 mb/d in February, with several refineries still damaged.
In short, the underlying rise in crude oil prices is driven by the Iran war, while the additional premium in fuel markets reflects both the Iran war and, in part, Ukrainian refinery attacks. But China also plays a role. As the world’s largest oil importer, it has responded to the global oil crisis by reducing its crude imports while, for much of the year, restricting fuel exports to protect its domestic consumers.
As a result of these factors, the crude market, which also contains most of the world’s strategic and commercial stocks, is less tight than the market for refined products, where inventories are lower and supply is directly exposed to final demand. Diesel is consequently trading at a premium of around $100 per barrel over crude, the highest such premium on record.
A lopsided truce
There is therefore little question that the bulk of the total increase in oil prices stems from the Iran war. Washington currently appears unable to resolve the disruption quickly, either diplomatically or militarily, and is unlikely to persuade Beijing to export more fuel than China considers to be in its own interest. Instead, the US appears increasingly willing to pressure the most exposed party, Ukraine, over which it still retains leverage through intelligence sharing and access to US weapons. The aim appears to be to lower fuel prices ahead of the midterm elections or, at least, to shift the blame for sustained high prices away from the Iran war and onto Ukraine.
A genuine broader energy ceasefire could, however, be beneficial to Ukraine if Russia also stopped attacking Ukrainian electricity, heating and gas infrastructure. Zelenskyy has publicly said that Ukraine would accept such an arrangement. But a refinery-only ceasefire would be highly lopsided. Ukraine is a fuel importer with little refining capacity left. Kyiv would give up a highly effective instrument of economic pressure, while Moscow would give up almost nothing and could continue attacking Ukraine’s most critical vulnerability ahead of winter: its electricity and heating system.
Russia, for its part, has little apparent incentive to accept a broader energy ceasefire as long as attacks on Ukraine’s power and heating infrastructure remain a fundamental part of its strategy of attrition. This makes reports of US pressure on European governments to push Kyiv to halt refinery attacks particularly concerning for both Ukraine and Europe. Europe risks being asked to help constrain one of Ukraine’s most effective pressure points without securing an equivalent Russian concession in return.
Strengthening Europe’s hand
In sum, the developments of 9–11 October likely signal both a growing US urgency to lower fuel prices and a wish to shift political responsibility for them. Once again, Europe’s dependence on foreign energy and weapons limits its room for manoeuvre and leaves it exposed to the domestic and geopolitical priorities of external powers.
Europe and Ukraine should nonetheless avoid overreacting. Moscow has a clear interest in widening any rift between Washington, Kyiv and European capitals. US unease about Ukrainian refinery strikes is also not new: the Biden administration urged Kyiv to halt them in 2024. Europe should also look at its own role: although its imports of Russian energy have fallen substantially since 2022, some European countries have continued to buy significant volumes. Following through on the final phase-out of the remaining purchases, while strengthening sanctions on Russia more broadly, could help strengthen Europe’s hand vis-à-vis Washington. That stronger hand could be used to insist that any energy ceasefire protects Ukraine’s power and heating systems and not just Russia’s refineries.
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