At the least a PR disaster for the UK around its Russia sanctions regime. At the worst the UK has been pushed by Trump’s war on Iran to easing up sanctions on Russia.

So here is the bad news:

https://www.gov.uk/government/publications/general-trade-licence-for-sanctioned-processed-oil-products/general-trade-licence-for-sanctioned-processed-oil-products

Given fears over jet fuel and diesel shortages in the UK - because of the closure of the Straits of Hormuz - the UK government has issued a general and indefinite licence to allow the purchase of jet fuel and diesel which uses Russian crude as feed.

There is little doubt in my mind that this will increase demand and prices for Russian crude - thereby bolstering budget and FX resources available to the Russian state to continue the war in Ukraine. Already the war in Iran has seen the US easing sanctions on Russian energy companies and that, together with higher oil and energy prices, has boosted energy sector receipts to Russia by around $10bn a month.

Now the UK, while perhaps grudgingly accepting the above, would argue that other additional sanctions announced on individuals and corporates and a tightening of sanctions around shipping of Russian LNG will overall tighten the sanctions noose around Russia. That is debatable.

First, on the individual and corporate designations I don’t think a few hundred additional designations really moves the dial given the many thousands already designated, with little real effect.

Second, the UK does not actually buy much Russian LNG, in Europe it’s mostly France, Belgium and Spain. You could say this is a case of “do as I say, not as I do”. The UK is looking to penalise others who buy Russian LNG while arguing its supply concerns makes its purchase of refined products using Russian crude a special case.

Third, and linking this all together, what is most important in sanctions regimes is signalling and direction of travel. And whether the overall net result of this is to tighten or not (I think not) the headlines will be pretty damaging in signalling the UK is going soft. That will embolden Russia in it war on Ukraine.

Now I get the UK faces real shortages now of diesel and jet fuel but rather than going soft on Russian sanctions it should have escalated this to a Nato security threat and asked for assistance from allies. Unfortunately likely Brexit has weakened its leverage in Europe and ability to get support there from EU partners.

The sad thing here is this all underlines that US actions (in Iran) against UK and European interests, for creating energy shortages and higher prices, is forcing allies like the UK to take actions against its core security interests - to ease sanctions against Russia. This is all making the UK and Europe more vulnerable and less safe. And unfortunately for Ukraine it likely means an extension of the war. This further undermines that US and European interests and perhaps even values are no longer aligned.

Timothy Ash, the senior sovereign strategist at BlueBay Asset Management in London. This blog first appeared in his substack here. Subscribe here.