European allies riled as US loosens Russia oil sanctions

By John Irish, Andreas Rinke and Dmitry Antonov

PARIS/ANDOYA, Norway/MOSCOW March 13 (Reuters) - Ukraine and its European allies hit out on Friday at a U.S. temporary waiver to allow countries to buy sanctioned Russian oil and petroleum products stranded at sea, with Ukrainian President Volodymyr Zelenskiy warning it would fund Moscow's war machine.

The U.S. issued the waiver in a bid to calm energy markets roiled by the Iran war, but it risks complicating Western efforts to deprive Russia of revenue for the war in Ukraine, with transatlantic ties already under severe strain.

Oil prices eased on Friday after the U.S. waiver announcement, which, according to Russia's presidential envoy Kirill Dmitriev, would affect 100 million barrels of Russian crude, equal to almost a day's worth of global output.

Standing alongside French President Emmanuel Macron at a press conference later in Paris, Zelenskiy said Russia would use the money for weapons, including drones.

"I believe that lifting the sanctions will, in any case, strengthen Russia’s position. It is spending the money it earns from energy sales on weapons, and all of this is then being used against us," he said.

"Just this easing (of sanctions) by America could provide Russia with around $10 billion for the war. This certainly does not help peace," he said.

Macron stressed the limited and temporary nature of the 30-day U.S. waiver. He added that there was no justification to lift sanctions on Russia and that if Moscow thought the war in Iran would give it respite, then it was mistaken.

German Chancellor Friedrich Merz said any move to ease Russia sanctions was wrong, suggesting Europe had been blindsided, while his Economy Minister Katherina Reiche said the decision was probably driven by U.S. domestic pressure.

"Six members of the G7 expressed a very clear opinion that this was not the right signal. We then learned this morning that the American government has apparently decided otherwise," Merz told a press conference in Norway.

"Again, we believe this is wrong. There is currently a price problem but not a quantity problem. And therefore, I would like to know what other motives led the American government to make this decision," he said.

Norway's Prime Minister Jonas Gahr Stoere also said that energy sanctions on Russia should not be eased.

RUSSIA WELCOMES US DECISION

Kremlin spokesman Dmitry Peskov told reporters on Friday the U.S. move was aimed at stabilising world energy markets.

"In this respect, our interests coincide," Peskov said.

According to data analytics firm Vortexa, around 7.3 million barrels of Russia-originated oil are in floating storage, while 148.6 million barrels are in vessels in transit.

Up to 420,000 metric tons of diesel and gasoil are currently in floating storage and could be available for sales in the market, according to LSEG ship-tracking data and trade sources.

Washington's move comes nearly two weeks after the U.S. and Israel began their strikes on Iran in an aerial war that has paralyzed shipping through the vital Strait of Hormuz.

The 32-nation International Energy Agency said on Thursday that the war in the Middle East was creating the biggest oil supply disruption in history.

Vessel tracking service Kpler said on Friday the U.S. waiver was unlikely to create meaningful new demand.

"Most cargos already appear to be placed with Asian buyers, particularly India. Instead, the measure mainly allows Russian barrels already in transit to complete their voyage and discharge," it said.

WAIVER RUNS TILL APRIL 11

The licence issued by Washington on Thursday authorises the delivery and sale of Russian crude oil and petroleum products loaded on vessels on or before March 12 and valid through midnight Washington time on April 11.

The move reflects White House worries that the surge in global oil prices will hurt U.S. businesses and consumers ahead of the November midterm elections, when Trump's fellow Republicans hope to retain control of Congress.

The sanctions relief took place after a call between Trump and Russian President Vladimir Putin on March 9 and a subsequent visit to the U.S. by Dmitriev to discuss the current energy crisis with a U.S. delegation that included Trump's special envoy Steve Witkoff and Trump's son-in-law Jared Kushner.

"It's obviously a decision for the U.S., but our position is clear. All partners should maintain pressure on Russia and its war chest," the spokesperson for British Prime Minister Keir Starmer told reporters.