UK Scales Back Proposed Russian Oil Sanctions as Domestic Fuel Prices Rise

On the morning of 20 May 2026, a new General Trade Licence — GBSAN0004 — came into force in the United Kingdom. Its language was bureaucratic, its publication low-key. But its effect was immediate and politically explosive: for an indefinite period, Britain would again permit imports of diesel and jet fuel refined from Russian crude oil, provided the refining took place in a third country such as India or Turkey [1][2].

The licence reversed, in practice, a ban the UK had announced just seven months earlier, in October 2025, when it pledged to close the so-called "refining loophole" that allowed Russian-origin oil products to reach Western markets via intermediary refiners [3]. The EU had passed its own version of that ban, effective 21 January 2026 [4]. Britain's version never got that far.

What Was Proposed, and What Survived

In October 2025, the UK government announced it would "ban imports of oil products refined in third countries from Russian-origin crude oil," matching a measure the EU had adopted months earlier [3]. The announcement came alongside a broader sanctions package that designated 34 entities, five individuals, and 51 ships under the Russia (Sanctions) (EU Exit) Regulations 2019, and included the UK's agreement to lower its oil price cap on Russian seaborne crude from $47.60 to $44.10 per barrel, aligned with the EU's new cap effective 1 February 2026 [5][6].

The price cap reduction remains in place. The entity designations remain in place. But the refined products ban — the measure that would have closed the most economically significant loophole — has been suspended indefinitely through the GBSAN0004 licence [2].

The licence permits the import of specific processed oil products — diesel and jet fuel — that have been refined in a third country from Russian crude [1]. The Home Secretary retains the right to change, revoke, or suspend the licence at any time, with a stated aim to give four months' notice before revocation [2].

By comparison, the EU's ban on third-country refined products from Russian crude remains formally in force, though enforcement is uneven. The US, meanwhile, has maintained its oil price cap at $60 per barrel — significantly higher than the UK/EU cap of $44.10 — and in May 2026 extended its own temporary sanctions relief on Russian oil for a third consecutive month [7][8].

The Hormuz Crisis: Why Now

The timing is not coincidental. Since late February 2026, when the United States and Israel launched an air campaign against Iran, the Strait of Hormuz — through which roughly 20% of global seaborne oil and LNG passes — has been largely blocked by Iranian forces [9]. The International Energy Agency has called it "the largest supply disruption in the history of the global oil market" [9].

Brent crude, which averaged around $63 per barrel in late 2025, surged to $138.21 per barrel in April 2026 before settling around $116.73 in mid-May — a 76% year-over-year increase [10].

Source: FRED / Federal Reserve

Data as of May 18, 2026CSV

The impact on UK consumers has been stark. Average petrol prices have risen from 132 pence per litre in September 2025 to 157p in May 2026 [11]. Diesel, which is more sensitive to global refining capacity constraints, has climbed from 141.8p to 189p over a similar period — an increase of more than 47p per litre [12].

Source: RAC / PetrolPrices

Data as of May 20, 2026CSV

Source: RAC / PetrolPrices

Data as of May 20, 2026CSV

Treasury minister Dan Tomlinson framed the licence as a necessity driven by these conditions, stating the government had to protect "the security of supply for really important foundational goods in our economy, such as jet oil [fuel]" [1]. He described the measure as "for a time-limited period and on a very specific issue," although the licence itself is formally indefinite [13].

How Much Russian Oil Reaches the UK?

The UK officially stopped direct imports of Russian crude oil in December 2022 [14]. But "direct" and "indirect" are doing considerable work in that sentence.

After Western sanctions redirected Russian oil exports away from Europe, Russia rerouted the bulk of its crude to India, China, and Turkey. Indian refiners alone were processing approximately 1.9 million barrels per day of Russian crude by May 2026, with peaks approaching 2.3 million bpd [15]. Those refiners then exported refined products — including diesel and jet fuel — to markets worldwide, including Europe.

According to the Centre for Research on Energy and Clean Air (CREA), refineries using Russian crude in India, Turkey, Brunei, and Georgia exported EUR 760 million of oil products to sanctioning countries in April 2026, of which an estimated EUR 232 million worth was refined from Russian crude [16]. The EU alone imported EUR 145 million of these products, alongside EUR 399 million to Australia and EUR 216 million to the US [16].

Before the October 2025 ban announcement, the UK was receiving a meaningful share of these third-country refined products. Precise volumes are difficult to pin down because trade classification systems do not consistently track crude origin through the refining process. But the new licence effectively acknowledges that cutting off this supply entirely is, under current market conditions, something the government is unwilling to do.

The Fuel Poverty Dimension

The domestic stakes extend beyond forecourt prices. According to the charity National Energy Action, 4.5 million UK households were in fuel poverty as of October 2025 — a figure considerably higher than the official government estimate of 2.2 million for England alone, partly because the charity uses a broader definition [17][18].

The End Fuel Poverty Coalition estimated that 43% of UK households were spending more than 10% of their income on energy, with nearly 5 million in "deep fuel poverty" — spending more than 20% [19]. Transport fuel costs compound these pressures: a 10p per litre rise in diesel prices adds roughly £5.50 to the cost of filling a typical 55-litre tank, a burden that falls disproportionately on lower-income households in rural areas with limited public transport alternatives.

The government's existing support measures include a 5p per litre fuel duty cut, which is due to expire at the end of August 2026. From September, duty will rise by 1p, with further 2p increases in December 2026 and March 2027, returning the rate to 57.95p per litre [11]. No compensatory fuel duty relief specific to the sanctions decision has been announced.

The 2025 Budget did act on household energy costs more broadly, pledging to move 75% of the domestic costs of the Renewables Obligation to the exchequer from April 2026/27, reducing average household energy bills by an estimated £150 [18]. But that measure applies to gas and electricity, not petrol and diesel.

Russia's Revenue: The Counterfactual

Sanctions advocates argue that every concession on Russian oil enforcement translates directly into war funding. The numbers support the concern.

CREA data shows that Russia's daily fossil fuel export revenues surged from roughly EUR 280 million per day in October 2025 to EUR 713 million per day in March 2026 — a 155% increase, driven largely by the Hormuz crisis pushing global oil prices higher [20]. Crude oil export revenues specifically rose 94% month-on-month to EUR 431 million per day in March [20].

Source: CREA

Data as of Apr 30, 2026CSV

The Council on Foreign Relations estimated that sanctions relief measures across Western nations may have contributed to an additional $150 million per day in Russian oil revenue in March alone, or $3.3 to $5 billion for the month [21]. If oil prices hold at current levels, analysts project Russia's annual oil and gas revenues could reach $180 billion — roughly triple what the Kremlin earned in the winter of 2025–2026 [21].

Alexander Kirk, a sanctions campaigner at the NGO Urgewald, said the UK move "sends the wrong signal to Moscow," noting that Russian state media was already portraying it as evidence that "Western resolve weakens when fuel prices rise" [22].

A senior Ukrainian official told the Kyiv Independent that the government was "clarifying the details" with UK officials, adding there was "currently very active communication between our diplomats, the office [of President Volodymyr Zelenskyy] and the British side" [22].

The Case for the Rollback

The government's defenders — and a number of energy economists — make a more nuanced argument than simple cost-of-living politics.

The core contention is that marginal tightening of oil sanctions by individual Western nations is, at this stage, largely symbolic given the scale of Russian rerouting through non-aligned states. With roughly 600 to 800 tankers in Russia's shadow fleet — representing 10–15% of the global crude and product tanker fleet — and 67% of all Russian crude shipped outside G7 jurisdiction, the leakage is structural, not marginal [23][24].

John Foreman CBE, an associate fellow at Chatham House and former UK defence attaché to both Kyiv and Moscow, called the move "cynical but understandable," while acknowledging the reputational cost: "It is hard to pose as the leader of the 'coalition of the willing' when doing dirty deals" [22].

The Brookings Institution has noted that as sanctions raise costs for targeted actors, those actors systematically reroute activity to substitute states and networks willing to facilitate trade — a dynamic that limits the long-run effectiveness of any unilateral or even multilateral restriction that does not include the major purchasing nations [25]. China and India, together accounting for the majority of Russian crude purchases, remain outside the sanctions coalition.

CREA's own data shows that the G7+ oil price cap "has failed to impose a durable constraint on Russian crude export earnings, working only briefly and selectively for Urals while leaving other grades and export channels largely unaffected" [20]. This creates the analytical foundation for arguments that the UK ban on third-country refined products was always more declaratory than operationally decisive.

Political Fallout

That analytical foundation has not insulated the government from political attack. Former Conservative cabinet minister David Lidington called the decision "an appalling betrayal of Ukraine," a line echoed by Conservative leader Kemi Badenoch [13][22].

The criticism cuts across party lines. Sanctions campaigners and Ukraine solidarity groups have pointed out that the licence was issued on the same day it came into force, giving little time for parliamentary scrutiny or public debate [1]. The indefinite duration of the licence, despite Tomlinson's characterisation of it as "time-limited," has drawn particular scepticism [13].

On the industry side, the decision appears to respond to acute supply concerns in the aviation sector. With the Strait of Hormuz closure disrupting jet fuel supply chains globally, UK airlines faced the prospect of summer shortages — a politically untenable scenario for the Starmer government [26]. However, no specific lobbying submissions from industry groups to the Treasury or the Department for Energy Security and Net Zero (DESNZ) have been publicly disclosed. The lack of transparency around which interests shaped the decision remains a gap in the public record.

Legal and Treaty Constraints

The government has not published a detailed legal analysis of the constraints it faces. Questions about WTO commitments, bilateral investment treaties, or the UK-EU Trade and Cooperation Agreement (TCA) as limiting factors on the original ban proposals remain unaddressed in public statements.

The EU's own ban on third-country refined products from Russian crude — adopted under its sanctions framework — suggests that WTO rules do not inherently preclude such measures, since the EU has faced no formal trade challenge on this front. However, the UK's post-Brexit regulatory independence means its sanctions architecture operates under different domestic legislation (the Sanctions and Anti-Money Laundering Act 2018), and the government may face different enforcement and compliance burdens [3][5].

No independent legal assessment of the government's claimed constraints has been published.

What Happens Next

The licence is indefinite, but the politics are not. The government faces a narrow path: maintaining credibility as a leading supporter of Ukraine while managing a domestic cost-of-living crisis intensified by the Hormuz disruption.

The fuel duty cut expires in August. Diesel prices are at their highest in more than two years. And Russia's oil revenues have more than doubled in six months.

The EU's 20th sanctions package, adopted in May 2026, includes new measures targeting shadow fleet operations and financial circumvention networks [27]. Whether the UK aligns with that package — or continues to carve out exceptions for its own supply needs — will be the next test of where Britain's sanctions policy actually stands.

For now, the licence number tells the story: GBSAN0004. Sanction number four — with an asterisk.