Lawfare Daily: Breaking Down Trump’s Diesel Deal with Russia

[Intro]

Rachel Alpert: ​It essentially allows for anything that is otherwise prohibited under both the Russian harmful foreign activities sanctions, regulations, as well as the UK and Russia sanctions related to the sale, delivery, offloading, or importation, including importation into the U.S., of diesel fuel from Russia.

Scott Anderson: It’s the Lawfare Podcast.

I’m senior editor Scott R. Anderson, joined by Rachel Alpert, a partner at Jenner & Block and former chief counsel for the Treasury Department’s Office of Foreign Assets Control, and Peter Harrell, a visiting scholar at Georgetown’s Institute of International Economic Law and former senior director for international economics at the National Security Council.

Peter Harrell: I do wonder if a part of Trump’s thinking is that this license and importation action might, in his mind, put some pressure on the Ukrainians to stop their military campaign against Russian refineries.

Scott Anderson: Today, we’re discussing President Trump’s deal for Russian diesel fuel and what it might mean for the war in Ukraine and beyond.

So we’ve had a pretty eventful couple of days on the Russia-Ukraine-United States energy sector front, both in terms of declaration of a, quote-unquote, energy ceasefire by President Trump with, you know, some questionable ramifications in terms of the military conflict, but mostly centered on this deal President Trump announced on Truth Social last Friday, announcing this plan to authorize the Russian Federation to sell Russian diesel fuel, something that previously had been subject to some restrictions, and specifically relating to the possibility that fuel will be coming into the United States.

Although President Trump, it’s worth noting yesterday, we’re recording this on October 14th, walked that back a little bit, suggested that in fact most of the fuel would go into the global markets, not into the United States. So, Rachel, let me start with you on this first. Walk us through a little bit about what President Trump said, and then what the actual actions the government took to implement this plan, this agreement he has communicated to having reached with President Putin in a call last week.

Rachel Alpert: So, I’m gonna focus on the implementation actions because that’s what I’ve been most focused on in looking at the sanctions space, and specifically General License 135. So, this is an authorization that OFAC issued that authorizes transactions related to the sale, delivery, offloading, and importation of diesel fuel of Russian Federation origin.

And so specifically what this does is it essentially allows for anything that is otherwise prohibited under both the Russian harmful foreign activities sanctions, regulations, as well as the UK and Russia sanctions related to the sale, delivery, offloading, or importation, including importation into the U.S., of diesel fuel from Russia that’s authorized until April seventh, twenty twenty-seven.

And so basically what this does is it allows for overcoming the prohibitions that would otherwise exist, including a prohibition under Executive Order 14066, and we can talk about how that relates to other statutes, which explicitly prohibits these types of importations. And then there are also sanctions that apply to different actors in the Russia fuel apparatus.

And so that’s the reason that you need authorization against both of these authorities because these different actors are sanctioned under a combination of the Ukraine, Russia, and the Russian Harmful Foreign Activity Sanctions programs.

Scott Anderson: So, there’s kind of two parts of this deal that I think are worth digging into.

One is this proposition that President Trump included in his statement on Truth Social, as well as in this license, suggests a possibility of importation to the United States. The license specifically says, essentially, we, all transactions related to sale, delivery, or importation, including into the United States.

So, it’s not limited to that, but it addresses that as well as a possibility. And then there’s the potential ramifications for diesel fuel sales outside the United States. Let’s focus on that importation question first, just because that’s kind of been the main focus of the controversy over the last few days around this proposition, including in Congress, where we’ve seen a bipartisan coalition of senators release statements and correspondence with the administration suggesting that this is illegal.

And suggesting this is illegal, they point to a 2022 law. It’s the Ending Importation of Russian Oil Act that Congress enacted that tries to put, or appears at least to put, a more solid barrier on importing a range of sort of petroleum-related products, specifically, I believe, everything in Chapter 27 of the Harmonized Tariff Schedule, which covers a whole range of petroleum products into the United States.

Peter, talk to us a little bit about this law and how you see this potentially intersecting with this license and the actions that the administration has undertaken.

Peter Harrell: So, let’s go back to when this law was passed and the couple of months prior to this law being passed. So, we’re in the first quarter of 2022.

We are or I guess in, by the time Congress is acting, very early in the second quarter of 2022. You know, we are two months or so after Russia has launched its widespread invasion of eastern Ukraine, and we have seen a series of executive branch actions to impose sanctions on Russia in kind of end of February and through the first part of March in response to its invasion of Ukraine.

So, we’d seen sanctions out of the White House pursuant to an executive order, Executive Order 14024, targeting, you know, the Russian sovereign wealth and assets, targeting some major, you know, Russian companies of different different kinds. And then I want to say it was on March 8th of 2022, President Biden issues this second executive order or an additional executive order, EO 14066 which prohibits, A, the importation.

This is an executive order issued pursuant to IEEPA. It prohibits, A, the importation of oil, of Russian oil and energy products into the United States, and it also prohibits new American investment in the Russian energy sector. And because this EO came down fairly quickly and because there was you know, sort of ongoing and prior to the invasion, prior to these sanctions, the U.S. had been importing not enormous but non-zero volumes of energy from Russia, I think particularly for sort of northeastern markets coming across the Atlantic, the Treasury Department issued a wind down license.

Same time that this EO comes down, they say notwithstanding the EO through, I wanna say sort of late April, I think it was probably 45-day wind down license, or April 20-something maybe saying, you know, imports are continue to be allowed for this period of time to kind of allow the on the water, you know, on the water tankers to continue to come into the U.S.

So, the executive branch, again, early March, acts against Russian, U.S. imports of Russian oil but also creates this kind of wind down period through late April. Then end of March, early April, Congress decides it wants to get in on this game. It wants to also take action to go after Russia generally, and they see kind of going after Russian energy imports as and, in some ways codifying this executive branch’s already existing ban as an attractive thing that they could do.

So having had this executive order in place and this wind down in place, Congress comes along and passes this law which essentially has two parts. It says that it is unlawful to import Russian oil, which it defines pretty broadly, all products in chapter 27 as you know, of the HTS into the US.

And then it basically sets up a congressional review process to review any presidential decision to end the Russian oil importation ban and, you know, sets a couple of criteria that the president has to certify Russia has met, you know, basically peace with Ukraine in order to lift the ban.

So, you know, Congress in some sense was codifying this already existing ban and creating some strings around lifting it. And this is one of a couple of things Congress was doing at about the same time. I mean, so Congress also in April, if I remember the date correctly, don’t hold it against me if it was actually early May, this has been a few years ago now, Congress also revoked Russia’s MFN status under U.S. tariff law.

There were a couple, you know, there were a couple of other things. Congress left most of the Russia actions in the hand and to the discretion of the executive branch, but they did do a couple of things. They did this, they revoked MFN status, and then there’d obviously been some prior Russia sanctions laws as well that were also in place at the time

Scott Anderson: So just to lay out the framework for folks who may be following this, we know there are restrictions that were imposed by the existing sanctions prior to this license on diesel fuel.

These are under the kind of 2014 and 2022 regimes about Russia. Both of those are expressly licensed by the general license 135 that the Treasury Department issued last Friday following President Trump’s announcement of this. I think no one’s really disputing those, that license essentially lifts any restrictions that those sanctions may have imposed that were premised on executive orders implementing the International Emergency Economic Powers Act.

That’s the statute underlying most economic sanctions. The question now is, though, can those, that same license also lift this underlying statutory restriction in this 2022 law as well? Now, I think folks who have looked at this law, and I think all three of us have now, and other folks I’ve talked to about this, have looked at it, and if you’re gonna look at a statutory reading of this as opposed to making, you know, a kind of constitutional argument or something else that maybe the executive branch could do, although I think most of that would be pretty, a little bit outlandish, although we can dig into that if you all disagree.

On the statutory front, the only real hook to give you an outlet out from under this restriction, to me at least, seems to be language that suggests the import ban is supposed to be implemented, quote, “In a manner consistent with any implementation actions issued under Executive Order 14066,” which is one of the executive orders, this one you mentioned, Peter, issued in 2022, although not the only one, underlying the, the what I described as the 2022 bucket of Russia-related sanctions.

So, Rachel, I think you looking at this, you are more bullish on this potential argument from the administration. I’m admittedly a little more skeptical, but let me hand it over to you. Lay out for us kind of where you think there may be an argument here the administration has as to why that statutory language opens the door to a license to these preexisting sanctions under IEEPA also being able to exempt these, this import ban.

Rachel Alpert: Yeah. You know, basically when you look at what this import ban by statute did, it, you know, bans this importation kind of based independently and not tied to the Ukraine-Russia sanctions program or the Russian harmful, aside from tying it to Executive Order 14066, which is an executive order that was issued under the Russian harmful sanctions program.

It’s under the same national emergency that was declared in 14024. That means it’s implemented by 31 CFR Part 587, which is one of the authorities cited in General License 135. But I think the, the key language is the language that you highlighted, which is in a manner consistent with any implementation actions issued under Executive Order 14066.

So clearly what this statutory language is trying to do is basically saying, okay we’ve created this requirement that’s essentially equivalent to the prohibition in Executive Order 14066, and needs to be implemented consistent with the implementation of 14066. Now, when we talk about implementation of a sanctions authority, what that generally refers to are the suite of actions that OFAC or whoever has delegated authority to implement the sanctions authority takes to kind of administer the sanctions.

So that refers to issuing regulations, issuing general licenses, issuing specific licenses, basically all of the kind of nuanced actions that are necessary to allow for the flexibility of sanctions regimes to be carried out by the executive branch in a way that’s not static. Here, I think further support for the idea that this implementation language is really intended to encompass licensing authorities relates to the legislative history.

So, if you look back at the kind of various iterations of the statutory text here, and I think what’s interesting is this language was actually in Congress being considered kind of in parallel and sometimes in the same vehicles as the MFN status revocation. So, it’s, you know, all tied together in the Congressional Record.

But earlier iterations of this statute, of these bills, had a much stronger limitation that would have actually not included this licensing authority. And so earlier iterations basically had a notwithstanding authority that said, notwithstanding any other provision of law, all products of the Russian Federation classified under Chapter 27 are basically banned from importation in the United States, and then it gave a forty-five-day grace period.

There was no language tying this to 14066 or the implementation of 14066. There was, however, an authority for a national interest waiver, which required ninety-day advance justification to Congress, and that waiver was subject to a joint resolution. And so that’s a much more standard approach when Congress wants to kind of not allow for licensing authority and instead includes a waiver authority, and then Congress has a way to weigh in on the exercise of that waiver.

In later iterations and in the version that ended up becoming law, that all went away, and instead we have this kind of weird 14066 language. But I think that background also informs the interpretation that language was really intended probably to address, and I wasn’t involved in this at the time, I’m not sure what the back-and-forth was, but it was likely to address executive branch concerns to try to ensure that there would be no issue with their ability to implement their licensing authorities.

Scott Anderson: So that’s an interesting reading, and I think it’s interesting in part because in some ways it runs contrary to how we would usually think about interpreting a statute, right? In terms of it had a, it had a waiver provision and they removed it, and now we’re reading the waiver provision back into it.

That’s implied textually. Now, that makes sense in this context because it is a sanctions law. It’s kind of a, kind of established practice. So I’m… But it’s interesting that in this context it would lead us to some kind of contrary conclusion. I still have some reservations about this argument, which I want to get into, but I want to hand it to you first, Peter.

How does this resonate with you, and what could Congress have intended with this language, if not to open the door to licensing, essentially applying equally to this restriction as to the IEEPA-based sanctions?

Peter Harrell: I think they’re really, you know, the question is, was Congress intending simply to, you know, ratify then existing, I think it was general license 15, I’d have to go back and check, this license that was then in place for another couple of weeks, or was Congress intending to create an open-ended kind of future licensing authority?

I think that’s kind of the crux of the, the debate. And I think that if Congress had intended to issue, to create an open-ended licensing authority as opposed to a, you know, closed, we are not meaning to supersede the as of enactment of this act in, I think, April 8th, 2022, anything in place I think Congress would not have created this entire convoluted set of requirements for lifting the ban that is subject to congressional review.

Because if Congress had intended to create an open-ended discretion for the executive branch via licensing to essentially, you know, and all, for all practical effects end the ban simply by executive fiat, like, why would they have stipulated gone through the headache to, you know, stipulate a complex set of termination criteria subject to congressional review?

So, I actually think the intent was not to create an open-ended licensing authority, but instead to ratify the fact that we would be consistent with then existing GL three more weeks of Russian oil imports.

Rachel Alpert: Yeah, I totally agree. I think that was, you know, at least intent of many in Congress at the time.

It’s just the language they chose in the drafting didn’t say that explicitly because it said in a manner consistent with any implementation actions issued under EO 14066, and it didn’t limit it to as in effect on the date of enactment. And so, what that does is even though, you know, that may have been kind of the goal of many, for those that are interpreting the text now based on the language they have in front of them, I think it provides arguably more discretion than Congress perhaps would have aimed to have just based on the words on the page.

Peter Harrell: Yeah, so I hear you, and I agree. You know, one of the, one of the great things about our legal system is that you have these, you know, ambiguous laws on the text, and, you know, if this ever gets in front of a court, the courts will decide what this what this phrase means. I... ‘Cause Rachel, I hear what you’re saying, and this is why, like, I do see the argument that this is authorized.

But I note it... while it does not say any implementation actions in effect as of April 8th, it also doesn’t say any future implementation actions, right? Like, I think you could have seen that read both ways. And then I also get back to sort of, you know, basic canons of statutory interpretation if you are supposed to read all parts of a statute as having meaning, and it is hard to read the second by verbiage vastly longer part of the statute as having any meaning at all if you read the first part of this statute the way you know, the way you are proposing that it be read.

Rachel Alpert: Well, and I’m not necessarily proposing that as, like, the reading that should be adopted, but I can tell you that those probably within OFAC chief counsel’s office and those that need to grapple with this, that is probably the reading that they are focusing on.

I think it’s also interesting to juxtapose this against the Graham Sanctions Act, where we have, you know, this kind of incredibly broad waiver authority and then this termination provision, because I think the same questions of statutory interpretation apply in that context. And I know, you know, it’ll be interesting to see what happens, but I wouldn’t be surprised at all if there’s an effort to kind of read the waiver authority incredibly broadly, similarly eviscerating the intent of the termination provision.

So, interesting analogies here.

Peter Harrell: J one, one final point, then Scott, I’ll turn it back to you. But I do want to say, just Rachel picking up what you said, I am glad that you think OFAC counsel looked at this before the president made his decision. I guess I’m less convinced that this wasn’t simply, you know, the president deciding on his call with Putin what he’s gonna do, and then they gotta square-

Rachel Alpert: Oh-

Peter Harrell: the legal circles.

Rachel Alpert: No, I think it’s the latter, likely. I have no idea. But, you know, you square those legal circles in the way you can, and I see room for a legal argument that, you know, they could be making here, shall they be forced into the corner to do so.

Scott Anderson: Yeah, it I think this is an ambiguous statute is the best way to understand this.

I would say, you know, the reason I’m maybe more cooler on the possibility of interpreting this, and frankly might have been warmer to the possibility a couple years ago, is that, A we’re in a post-Loper Bright world. We’re in a world where in theory, the deference the OFAC and the executive branch generally gets on interpreting these things isn’t quite to the level what it was.

Now, I’ll query how much that applies in national security context, but nonetheless, that’s at least a bit of a pushback there, room for pushback, a higher risk margin. And I do think there’s some practice that cuts a little bit of the way, including in the Graham bill. I believe in the Graham bill, if I recall correctly, tries to codify a number of sanctions as well.

I think it actually expressly pulls in licensing authority in a way that this doesn’t, obviously. So, it’s one of these things where Congress hasn’t done this consistently, so you’re gonna have these different conflicting interpretations. The question I have, though, about this is whose view of the law on this actually matters for accomplishing what the president wants to do on importing?

And this is where I think this begins to fall apart because my sense of this is that while there may be colorable arguments that you could reach under the statute to say reasons why licensing would allow the president to waive this sort of barrier, that you actually have to persuade diesel importers to rely on that in a context where they might have exposure or potential legal penalties, and that’s a much harder sell.

How does that resonate with you all in terms of what the actual barrier is with Trump administration? It’s not whether it can convince itself it has the legal authority to do this. It’s whether it can convince the economic actors it needs to actually import the oil in reliance on this.

Rachel Alpert: Yeah. And I would just add, you know, this is just U.S. sanctions issues, right?

So, there are also sanctions that apply from other jurisdictions like the EU, like the UK, that are relevant here. And so, you know, to the extent we’re talking about those involved in the diesel trade, you know, I can imagine that many might have touchpoints beyond the United States. So, this does not address any of those sanctions prohibitions.

But I’ll turn it over to Peter to talk about the specific concerns that the diesel importers might have on the U.S. front.

Peter Harrell: You know, I mean, I haven’t talked with a huge number of diesel importers. I have to say it is... I think it would be unlikely that a major U.S. importer would want to touch this.

I mean, part of that is the legal ramifications here, and sort of do you want to import in, you know, hearing the debate here, what we might characterize at the very least as a gray area or a contested area of the legality of it. And then second, you’re gonna have an enormous set of reputational ramifications, and we’ve already seen this, you know, import plan come under quite a bit of, frankly, bipartisan congressional scrutiny.

You can easily imagine that any CEO whose company is importing diesel here is gonna get hauled in front of Congress you know, again, with bipartisan basis, maybe irrespective of who controls Congress in a couple of months. So this strikes me as something that, you know, your sort of major importers are not particularly going to want to touch.

And then as Rachel says, that, that’s sort of the U.S. legal issues, potential legal issues, and U.S. reputational issues are before you even get into the fact of, okay, are you going to be able to find a, you know, a ship and a broker and all the rest that are not subject to EU sanctions and the like.

So, I think this is gonna be hard. Yeah, I don’t know. Is there gonna be some, you know, smaller company, some company, you know, closer to Trump that is then gonna, you know, try to import it, and will they find a sort of a secondary buyer for it? That seems still unlikely to me, but, you know, I suppose I couldn’t totally rule it out.

I also wonder if you know, if this went forward, if the U.S. government would be interested in purchasing it somehow directly. Like, the SPR isn’t a good fit because that’s crude oil, not diesel. But, you know, I don’t know to what extent other government agencies might be able you know, sort of under their contracting provisions to do this if the president is sufficiently committed to it.

Because I do, and I do, but I do think if we’re thinking practically speaking about buyers, it would either be a government or a close to government buyer and not your sort of run-of-the-mill commercial actor who’s gonna be hearing a lot of legal and political debate around this.

Rachel Alpert: Yeah, and I would say, you know, my reading of the statute as, say, an executive branch lawyer who needs to post hoc justify what the president and Treasury have done, you know, would be, you know, perhaps one way.

But if I’m a company seeking to get reassurance that this is all within the scope of what’s authorized, I certainly would take the more conservative view, especially given the statements, the bipartisan statements from the senators involved in this law that explicitly say that it’s contrary to the statutory language and intent.

So, you know, certainly that cuts strongly against, you know, taking any sort of expansive interpretation of what the statutory text might mean for those that are worried about any sort of enforcement action now or in the future because of how long statute of limitations go.

Peter Harrell: It was also interesting as we think about this.

I mean, you know, when President Trump first announced this deal on Friday, the tone he used was very much the U.S. is going to import diesel from Russia. You know, I don’t wanna read too much into sort of every shift in, you know, like Kremlinology. I don’t want to extend to sort of every shift in phrase that the president uses.

That said, there was a noticeable shift yesterday when he was asked about this, and it was— he did not reiterate that, you know, some ship is coming to the United States. He did begin to speak more generally about, well, this is putting diesel on global markets et cetera, et cetera. So, I do wonder if in the administration it might be sinking in, hey, commercial actors are not gonna step up and import this, and maybe we need to pivot expectations a little bit.

Scott Anderson: Yeah, I think that’s right.

Certainly his comments today, he said pretty clearly, you know, these things are gonna go on the global market. But I would note, even if you go back and look at his Truth Social, he very clearly always says U.S. and global markets together. He never actually says these drills are gonna arrive in the United States.

It seems to nod at it as a possibility without a commitment, which strikes me as maybe some careful caveating where you wanna have the talking point about something that looks like it’s gonna more directly benefit consumers without even at that point the certainty or the confidence that you can actually make that happen to some extent, whether ‘cause of legal barriers or whether because of market dynamics, you know, one, one avenue or the other.

So, let’s talk about that global impact question, ‘cause that’s the other side of this coin. Up until this point, up until Friday, I believe it’s correct that the main U.S., setting aside allied constraints, which you’ve already mentioned, Rachel, and we should get to, but the main U.S. constraint on the global diesel fuel trade for Russia was based in those sanctions regimes imposed that are specifically referenced in the license, and that this would have the ability to lift those constraints substantially.

There may be some residual statutory restrictions from Katsas or something like that. I don’t think so looking through this when I was trying to parse it out the other night. And we’ve seen the Russian — pardon me, the Trump administration do this before a few times for actually a broader range of goods.

We saw licenses 133, 134, and 134B in April and May, I think it was, basically say for 30 days we are lifting sanctions on array of oil products, not just diesel fuel. Initially just to allow some processing by India and then to take a variety of other small steps to kind of lower oil prices, or general kind of petroleum energy prices at that time that were spiking because of the Iran war.

Is that the right way to see this, really, as more of a continuation of those earlier licenses, but for a longer time period, and then in this case for a narrower band of products like diesel fuel?

Rachel Alpert: I think that’s one way to look at it. Granted, you know, the context of how this came up here is obviously unique and, you know, has its own special features.

But, you know, certainly, you know, as you’re considering... Looking at Katsas, for example, while there’s, I don’t believe, a barrier to any of this, there is a congressional notification requirement, congressional review requirement for licensing actions that significantly alter U.S. foreign policy. And so, the question here is: Did this particular licensing action specifically alter U.S. foreign policy, or was it actually GL 134 and 134b that is, was the significant alteration to U.S. foreign policy and this is just a follow-on action?

Peter Harrell: Just a couple of additional points on that. I mean, one other difference is that if memory serves, 133 and 134 were applicable only to crude and product that was then on the water. It was not applicable to kind of future produced crude end product, whereas this is very clearly applicable to future produced product, which makes me think they will...

You know, there is clearly an expectation that this will be a significant duration, whereas I do think back in April and May, the view was this was a, you know, those were short-term actions intended to deal with what was then perceived to be a short-term kind of issue. I guess one thing I do wanna say just in you know, I wanna make very clear I at a policy level, I disagree with this decision.

We’ve talked about the legal issues, my view on the legal issues. One place where I do wanna be fair to the Trump administration is that the Trump administration is not the first or only administration that has struggled with how to balance concerns about high energy prices with sanctions policy.

You know, if I go back to the Biden administration although the President Biden did, as we discussed in March of 2022 ban U.S. imports of Russian oil, the Biden administration was also quite concerned to not see a bunch of Russian oil immediately exit global markets, which would have caused price spikes, and indeed, over seven or eight months, developed a very kind of complex price cap scheme, the purpose of which was to keep Russian oil on the, you know, flowing into global markets, albeit not the U.S. in order to kind of stabilize or avoid spiking global prices, or if I go back to the Obama administration when we were working on taking Iranian oil off the market consistent with the statutory congressional mandate that we were supposed to take Iranian oil off the market.

There was a very deliberate process to kind of get the countries that were then importing Iranian oil, you know, Korea, Japan, China being the biggest ones, to, you know, reduce those imports over time at, you know, so that additional supplies could come on the market, and that was also driven by concern over oil prices.

So, I... While I fundamentally disagree with this decision, I also think the volumes we’re talking about here on diesel are extremely unlikely to materially impact prices. I do think we also just need to be candid and direct that, like, Trump is not the first president to have to grapple with the dilemma of how do you deal with sanctions that might be having some impact on prices at the pump.

Rachel Alpert: Yeah, I think the big difference between, you know, both of those examples and the situation here was the involvement of other countries, right? And so it was, with the price cap, that had such significant multilateral coordination, and there was a real effort to ensure that was done in a coordinated way.

Likewise with the SREs for Iran, you know, that involved engagement with the countries that were impacted. And so, I think that increases the potential efficacy of an action like that, where there’s going to be some degree of flexibility in a sanctions regime done in collaboration with other like-minded countries.

Here, when it’s done more, you know, unilaterally/bilaterally with Russia, it’s just gonna not be as effective.

Scott Anderson: Well, I think that gets to the question I want to present you all about the global ramifications of this, which is that on a theoretical level, you know, if just at the kind of economic supply and demand curve element, you can see why if you were to lift global sanctions on the trade in a particular good, diesel fuel in this case that could result in an increase in the effective supply available to a variety of purchasers that have to comply with your sanctions, and that would result in lower prices.

And that sort of theoretical logic was underlying the prior license actions pretty clearly. It seemed to be clearly aimed at prices, and you could see a similar logic here. But experts of various stripes have pointed to at least two substantial barriers to that. I kind of would like your reaction to that.

One is very much what you were just talking about, Rachel, which is that this is just lifting U.S. sanctions. This isn’t a coordinated lift of European or other global sanctions, which are still very much in play in this sector and probably are still gonna present a variety of barriers. Maybe it’s coming, but there was no effort to kind of coordinate this in advance before this announcement, meaning your ability to facilitate the sort of expanding access to crude oil seems pretty limited.

The other factor is something you alluded to, Peter, which is just Russia’s core capacity and the relatively small amounts we’re talking about here. I think it’s ultimately 4,8000,000 barrels is the specific amount Trump alludes to over the course of a unspecified period, but kind of implied to be over the next several months.

If they were to stretch that to the end of the year, I saw one estimate that pegged that as about, you know, a little under 2% of U.S. consumption in this time over that month, which is if you get the full 4,800,000. Right now, only 500,000’s been authorized by Russia. That is a relatively small drop in the bucket for U.S. consumption.

If you’re dropping it into the whole global market for diesel fuel, it’s way, way smaller, meaning the impact on price seems likely to be relatively limited. So, what does that mean for what the president is trying to get out of this? Is it a just a talking point? Is there more to it? And how does that fit into the strategic logic both of President Trump and of President Putin in entering into this deal?

Peter, do you have thoughts on that?

Peter Harrell: So, one thing that has, you know, I do think has been impacting the global price of diesel is less the sanctions in recent months, but the, you know, quite effective Ukrainian military campaign against Russian refineries. You know, we’ve seen over the course of this year the Ukrainians have used drones to seriously damage many of Russia’s refineries.

If memory serves, we have saw last year prior to Ukraine really bringing the war to Russia’s refining sector, I think Russia was exporting about 800,000 barrels of diesel per day. It was one of their major refined products. In light of the refinery destruction you know, I think so far over the last couple of months it’s been more like 150,000 barrels per day.

So, like, you know, more than 500, 600,000 barrels of diesel a day taken off global markets by the Ukrainians. To the point that for a while, as you alluded to, like Russia had actually under its own domestic law started restricting diesel exports ‘cause they were trying to conserve diesel domestically.

So, and that’s a material, it’s a material amount of diesel for markets. So, I think we are seeing the war impact global diesel prices You know, I do wonder, and I mean, have wondered as a part of this deal, ‘cause the other thing, another, another potentially related thing we have seen happen over the last couple of days is that Trump has somewhere between called for a ceasefire on energy infrastructure in Russia and said that there is a ceasefire on energy infrastructure in Russia, even though, you know, there’s no sort of observable evidence that there’s a ceasefire, on energy in, in Russia.

But I do wonder if a part of Trump’s thinking is that this license and importation action might, in his mind, put some pressure on the Ukrainians to stop their military campaign against Russian refineries. And if Russia over a few months was able to rebuild their refineries and get back to exporting 800,000 barrels a day, that would have some impact on global prices.

Certainly a lot more impact on global prices than, as you point out, Scott, you know, sort of, you know, a couple of days of prior exports that Trump has talked about in his own numbers.

Scott Anderson: How about you, Rachel?

Rachel Alpert: Yeah, I mean, I think, you know, one thing I keep coming back to is just, you know, the fact that this has not actually lifted U.S. sanctions, right?

All this has done is issued a temporary authorization for a specified amount of transactions and certain types of imports if anybody ever decides to rely on it. And as we’ve seen, general licenses can be revoked just as easily as they can be issued, and I think the number one example of this in the past few months was General License X with respect to Iran.

Now, we’re in a very different situation with Russia, obviously, than, than we were with Iran, but, you know, I think companies seeing that track record may be quite hesitant to rely on what’s essentially kind of a temporary scope authorization, especially when there’s still so much in flux and so much that has not yet been determined.

Scott Anderson: Yeah, that’s definitely a fair consideration, especially when you consider for Russia to actually increase its export capacity to maybe in numbers that have a bigger impact, it’s gonna have to rebuild its refinery capacity that’s been taken out by Ukrainian military strikes. So even if you could get a stop to those, that’s gonna be a months-long endeavor.

It’s gonna go beyond the six-month sort of strain to long-term contracts and things like that are gonna have to push beyond that window to be a substantial volume, just don’t seem like they’re in the cards in this window. But doesn’t mean the president couldn’t expand it if he finds it useful. To me at least, the part that jumps out at me as concerning about this is similar to what you said, Peter, although I almost want to flip the incentive.

I’m not sure that this is a deal that puts, the United States thinks puts pressure on Ukrainians. I kind of think this is a deal that Vladimir Putin thinks, gets the United States to put pressure on the Ukrainians in that he seems to have persuaded President Trump that Ukrainian military action is a contributor to high global energy prices, which is his main political liability right now.

And that sort of connection, which has been... This is not the first time that’s manifested. We’ve heard rumors of that, the Americans pushing the Ukrainians to limit their strikes on refineries and other diesel fuel and energy capacities in Russia through at least September, I think earlier than that as well, but starting, like, in a real volume in September.

You know, this is a real sign that, like, President Trump in this conversation on Friday seems to have really come around on this idea. And to me, that makes the big question now, how long will he remain in this position, or will somebody be able to persuade him it’s not quite that one-sided and narrow a focus?

We have to take a broader aperture at this whole sort of issue set.

Rachel Alpert: Yeah. Well, and if this is really all geared towards, you know, the midterms, then we are a few weeks away. What happens after that?

Scott Anderson: Yeah. Yes, it’s a fair point. So, we kind of laid out why this deal doesn’t seem like 100% it’s going to actually do that much.

You know, the United States, President Trump, the clearest thing he’s gotten is a talking point that at least he hopes has political salience, although it’s worth noting that this deal has had a pretty negative reception, including among congressional Republicans and others. So, the political payoff may not be what the president hoped it would be.

But nonetheless, he’s clearly got that. It’s not clear that you know, lower diesel fuel prices or let alone U.S. imports are likely on the horizon. But let’s say that the factors we think are likely to deter a potential U.S. importer never really manifest. Or they manifest, but there’s at least one substantial importer willing to buck them and say, I am gonna lean on what the president has said, and I’m gonna bring Russian oil, diesel oil fuel to the border in the United States, maybe at a substantial volume enough that it would even affect domestic prices to some extent.

What happens in that sort of scenario? There is, while there may... the administration may have arguments as to why the 2022 Ending Importation Act doesn’t apply here, there’s also certainly contrary arguments. There’s lots of reason to think it actually should be a hard barrier. And you would want a court to evaluate this, but a lot of question a lot of people have about this is how are these issues actually gonna get from before a court, if at all?

Peter, what are your thoughts on that?

Peter Harrell: Yeah, so I think very practically speaking, they probably aren’t going to get before a court because obviously that would first require the imports to happen or at least to, you know, sort of be apparently likely in the near term to happen. And then second, you would need someone with standing to sue to decide they want to try to, you know, get this into a court.

And the kind of obvious companies that I could think of that might have, you know, standing here who could show some injury from this act would be, you know, a domestic refiner that might see a loss of margin if it had to compete with unlawfully, you know, potentially unlawfully brought into the United States diesel.

But I think as a practical matter, you know, the energy industry, major players in the energy industry, refiners are unlikely to want to pick this fight with the Trump administration, and I think would be unlikely to go into court. I do wonder, and right, I’m not, you know, look, I’m a transactional attorney, I’m not a litigator.

I do wonder, you know, maybe there’d be some like- small, you know, fuel distributor in the Northeast that couldn’t get the Russian oil that would be face- or the Russian diesel that would be facing, you know, price pressure as a result of this. Like maybe there’s some smaller player who might both be able to show injury and have the political appetite to take this on.

But I do, and I think it’s very interesting to think about who that might be or how that might be and, you know, if this got in front of a court what a court would do on it. But I’m, you know, current bet would be we’re not actually gonna see this get into court.

Scott Anderson: Yeah. On the competitor note, I would note it’s worth bearing in mind diesel does have some direct competitors in terms of kind of drop-in alternatives.

So, you have biodiesel and renewable diesel. I’m actually not sure what the exact difference is between the two, other than the fact that they are categorized differently. But both of those have substantial presence in the United States and you know, are actually manufactured here. So presumably, they’re gonna face pretty sub-stiff competition, and they’re not gonna have as much competing interest in terms of maybe they would wanna take advantage of the same import.

Their biggest deterrent would be, you know, do we wanna risk the wrath of this administration or and take on the cost of doing this? Rachel, what do you think about that, this sort of question? Not just the standing question, but where does the litigation come on this from? Where is the legal pushback?

You know, looking at this a little bit, we know there are civil and criminal penalties that can be applied where somebody imports things, something contrary to the law. And I haven’t found any reason to think those wouldn’t apply to this if the twenty-two law does actually apply. Meaning, maybe you could have enforcement action at a certain point that would trigger some sort of legal process, but that’s probably not gonna be under this administration.

So, is there something else to get in court sooner than that, or is it really a deterrent effect of future enforcement action by a future administration that’s the real, the stick waiting at the end of the risk-benefit calculation?

Rachel Alpert: I mean, I think like, again, looking at the statutory text and what it requires, you know, it’s that these products shall be banned from importation.

So that’s really the onus is on the government to enforce the ban. And so, I think the most likely lawsuit here that, you know, could have some legs, although again, I think with the executive discretion in the national security space, it would be, you know, despite Loper, right? You know, it would still be hard to win here.

Would be just that the executive branch has exceeded the scope of their authority to license the import of diesel into the United States. And so, you know, somebody who is harmed, impacted by the existence of this license, you know, because of all the reasons that have been discussed, could bring that suit under, you know, the APA saying that this is not within the scope of existing authorities.

Now, that doesn’t give damages or anything like that, but it could enjoin the continued enforcement of the license. And then to the extent there were imports subsequent to a decision like that, then, you know, we get into questions about what happens next.

Scott Anderson: So, there’s one other statute kind of looming on the horizon that we should talk about, that we’ve alluded to once already, but we should get into, and that is the Graham bill that President Trump signed into law on September 18th, I believe in the last few weeks, set to be implemented...

Well, the relevant provision, the most relevant provision here, is set to be implemented on October 18th, which a provision that mandates the imposition of tariffs on at least certain major importers of Russian crude oil. It’s more sophisticated than that. I’m, there’s a, like, more complicated formula on who exactly you sanction and certain conditions, and there’s also other conditions that can trigger to be, countries to be on that list.

Or I’m sorry, I shouldn’t say sanction. Impose tariffs upon, substantial duties on whoever you find that’s less. But the core purpose is essentially if you’re a major importer of Russian crude oil, you are supposed to at least be, at risk of being subject to the substantial tariffs. There’s a waiver provision, as Rachel alluded to that’s fairly discretionary, you know, fairly open-ended, at least by my reading of it, although feel free to disagree.

But there still is this kind of question of, okay, the president just signed this law. How contrary to this is this? How do you make sense of that? I mean, the one distinction I noted as I was reading through the law is that the way the Graham bill defines crude oil actually appears to exclude diesel fuel.

So, it’s not, I mean, it’s not clear, but there’s a clear distinction there ‘cause they’re kinda two separate parts of the tariff schedule that, and the Graham bill refers to one and diesel fuel is in the next one. I think it’s 2709 and 2710. So maybe there’s not a hard conflict there, but how easy is it to disaggregate, you know, diesel fuel from the purposes motivating the Graham bill and that presumably this Congress and in theory, this president just agreed to.

Rachel, you have thoughts on that?

Rachel Alpert: Sure. It’s challenging from a policy perspective for sure. And, you know, arguably, the Graham bill shows a consistency of congressional intent kind of throughout the period from twenty twenty-two through the present to limit the ability of Russia to earn proceeds from its sales of products from its oil sector, whether it be diesel or crude.

You know, in terms of specific conflicts, you’re right, there is not one because of the difference between the HDS schedule of diesel versus crude. But as a, you know, matter of optics and our engagement with our foreign partners, to the extent we were actually going to impose any tariffs mandated under the Graham Act, I guess I should say now, you know, it, it kind of looks like we’re having our cake and eating it too, allowing diesel imports on the one hand, but at the same time, kind of waving a stick against those that seek to import Russian crude on the other.

And I do think it’s an interesting— it’ll be interesting to see what happens. I mean, the Graham Act has discretion both with respect to the amount of tariffs that are imposed, they just have to be greater than zero, right, and up to a hundred percent, as well as this waiver authority, which is a very broad national interest waiver.

And so, you know, I wouldn’t be surprised at all if kind of the range of issues that are being discussed and at issue in this agreement underpinning the diesel general license, something along similar lines in conjunction with the status of our bilateral trade negotiations is used to justify non-action, essentially, on the tariff front come October eighteenth.

Scott Anderson: Peter, any thoughts on that?

Peter Harrell: Yeah, just pick up on Rachel’s last point. I mean, we are supposed to see initial implementation of the Graham bill on the Sunday, on the, by, by the Sunday, on the 18th. So, we may soon get an answer to how this will in fact play out. I guess just one, only half in jest comment also half in seriousness I could actually completely see our president deciding he’d be totally happy for the rest of the world to not buy Russian diesel so that all of it came to the U.S. and maximized the potential price reduction in the US.

Like, he’s much less concerned about the, these kind of issues that, you know, concerned Rachel and me for many years when we were in government and since about sort of equality of treatment with our allies. Like, he’s all about, let’s get all the diesel fuel right here. So, I wouldn’t, I can’t totally rule out him being completely comfortable tariffing foreigners for buying Russian diesel while reducing our own barriers to importing it into the U.S.

Scott Anderson: Well, we are almost at time today, but before we part, I wanna leave the listeners with you know, something to look ahead to and to watch. There’s been a lot of interest in this story. I think, frankly, probably more than the Trump administration may have been anticipating on Friday when the president issued that, that tweet.

And there’s gonna be more scrutiny on it so far, as long as this deal kind of is out there, this license is still available, and particularly as it continues to intersect in a very real way with Ukrainian military operations on the ground. So, this issue’s gonna be with us. From your all’s perspective, what will you be looking at in the kind of weeks and maybe months to come to see where this arrangement is actually landing, is whether it’s actually having an impact or not?

Is it in trade? Is it in additional governmental actions? What are you watching to see exactly what the ramifications are of the president’s decision here? Peter, I’ll start with you, and I’ll let you close, Rachel.

Peter Harrell: Look I’m just gonna start with, like, is anybody in the U.S. or elsewhere around the world gonna buy it?

I think elsewhere around the world they will. I mean, there has been some trade. Volumes have, you know, obviously been curbed because of the Ukrainian military strikes and the Russian export ban. But, like, I do think foreigners will buy this because while there is ambiguity under U.S. law, you know, I think it is illegal, ambiguity around U.S. law, I think that if you are a, you know, importer in India, for example, putting aside the sort of half-in-jest comment I just made, if you’re an importer in India, I think this gives you a fairly high degree of comfort right now that you can go ahead and import this diesel from Russia.

So, I will be watching to see if we get buyers. I’m not 100% sure of that. We’re watching to see if we get buyers and then where those buyers might actually be. If I were betting, I’d bet India, but, you know, we will see how that, maybe China, we will see how that plays out.

Scott Anderson: Rachel?

Rachel Alpert: Yeah. I would add on, I mean, one question I have is, how long will this general license last? Especially given the degree of scrutiny that it’s currently subjected to, the amount of criticism that it’s receiving. Two, in addition to looking at, you know, who and where the buyers are, I’ll be very curious to see who is involved in these transactions.

You know, what vessels might be used, who’s providing insurance, who’s flagging the vessels. Because again, it gets very complicated very quickly when we’re talking about the applicability of other global sanctions regimes. And so, it could be very challenging in practice to implement any transactions.

And then finally, overall, I think there’s the very big picture of what will any of this do with respect to Ukraine, their position, their ability to pursue the war in the broader context, and Russia’s responses.

Scott Anderson: Well, we will have to keep our eyes peeled on those variables moving forward. But until then, we are out of time for today.

Rachel Alpert, Peter Harrell, thank you for joining us here today on the Lawfare Podcast.

Peter Harrell: This was great. Thank you, Scott.

Rachel Alpert: Thank you.

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