The Graham Act protects U.S. sanctions from White House meddling, but Ukraine’s strikes on Russian oil may still be the stronger bargaining chip.
On 18 September, Donald Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act. That same week, Washington pressed Kyiv to stop striking Russian refineries because of a spike in U.S. diesel prices, while the Kremlin named its price for an “energy truce”: safe passage for its tankers and the lifting of sanctions. All these storylines point to one question: when will Russia’s budget crack badly enough for Moscow to sit down and negotiate?
The new law makes lifting sanctions much harder, but it does not immediately make them hurt more. And the one form of pressure that actually grew this year and delivered results – Ukraine’s strikes on Russia’s oil industry – is now on the negotiating table. In my article last year on strengthening sanctions, the argument was that as sanctions pressure expanded, Russia would become more pliable and start seriously discussing terms for ending the war. The United States was seen as the main lever, with Europe in a supporting role.
However, over the past year, Washington effectively loosened enforcement and did not expand sanctions. Europe kept adopting packages, though each new one caused more disputes inside the EU. Ukraine, meanwhile, turned its long-range drones into a sanctions instrument of its own, striking refineries, ports, and tankers: the so-called long-range sanctions, as President Volodymyr Zelenskiy calls them. The Graham Act is Congress’s attempt to push Washington back into this game. The administration now has not only a lever but also a certain obligation.
A Safeguard, Not a Lever
On paper, the law looks formidable: sanctions on Russia’s Central Bank and state-owned banks, a ban on new U.S. investment, tariffs of up to 500% on Russian goods and up to 100% on goods from the largest buyers of Russian oil and gas, and measures against the shadow fleet, a network of oil tankers used to keep exporting Russian oil despite Western sanctions.
But most of what takes effect automatically bans things that barely exist anyway. Sberbank, VTB, and Gazprombank have long been under full U.S. blocking sanctions, and American investors are not lining up for Russian oil fields. The law’s value lies elsewhere.
Until now, sanctions rested on executive orders that the next president could revoke with a single signature. Now they are written into law and can be lifted only after Ukraine accepts a peace agreement. This is a safeguard against a quiet rollback or a “sanctions-for-a-ceasefire” deal made behind Kyiv’s back. Everything that could actually increase pressure, however (whom to add to new lists, which foreign banks to penalize, how high tariffs will be), remains at the president’s discretion. He or she can also waive any sanction simply by explaining to Congress that U.S. national interests require it, and Congress cannot block that.
The real safeguard against quiet sabotage is not the text of the law but the makeup of the next Congress: if Democrats win the House in November, failure to implement the law could become grounds for hearings (or even another impeachment attempt). The first test comes around 18 October, when the 30-day deadline expires for the first round of sanctions moves required by the law, covering designated Russian officials, individuals, vessels, and other categories set out in the legislation. On 22 September, Trump said he was ready to use the new powers to impose tariffs of up to 100% on buyers of Russian energy, but for now this looks like part of any future negotiations.
In the first eight months of 2026, Russia’s budget deficit reached about $68 billion, already one and a half times the target for the entire year.
One detail deserves special attention. Washington can treat any vessels already sanctioned by the EU, the United Kingdom, or members of the “Five Eyes” intelligence alliance as sufficiently proven violators. In effect, the United States could outsource sanctions intelligence to the Europeans, whose shadow fleet list already exceeds 670 vessels. But these ships become only candidates for punishment: the administration still has to make such decisions for sanctions to take effect.
The Budget: Where’s the Oil Money?
In the first eight months of 2026, Russia’s budget deficit reached about $68 billion, already one and a half times the target for the entire year. The main reason is oil and gas: revenues from them fell 17% year on year, despite a temporary boost to oil revenues from the war in the Middle East and disruptions to shipping through the Strait of Hormuz. Before the full-scale invasion of Ukraine, oil and gas provided 30-35% of Russian budget revenues; now they account for less than a fifth. The Kremlin is compensating through taxes: in January, VAT was raised from 20% to 22%, squeezing small businesses and online marketplaces, and non-oil revenues grew 18%. But spending is rising almost as fast, by 15%. Moreover, this tax base is itself under fire: since mid-July, Ukrainian drones have hit more than 20 warehouses of Wildberries, the leading online retailer, and in August they turned to Ozon, another popular online retailer. The strikes damaged several of Ozon’s logistics facilities, temporarily taking part of its warehouse capacity offline. These are direct losses for logistics and retail, although their fiscal effect is harder to measure for now.
The domestic debt market is also coming apart at the seams. Over the last few months, the Russian Finance Ministry instituted a two-months mandatory pause in government bond auctions and cancelled several summer auctions, where officials had planned to raise about $18 billion in the third quarter but collected only about $100 million in July. After those failures, the ministry was forced this month to return to the bond market with floating-rate bonds. This move only underscored the depth of the problem: to raise funds, the state had to feed state banks a huge issue of floating-rate paper and push yields on conventional bonds to 16% and higher.
This signals not a return to financial stability but a rapid increase in the Kremlin’s debt-servicing costs, which are already becoming a heavy burden on the entire Russian economy. The National Wealth Fund cannot close this gap either: it holds about $47 billion in liquid assets, less than the eight-month deficit.
Nor is this a temporary problem. On 24 September, Russia’s Finance Ministry submitted its 2027–2029 budget to the government, projecting a deficit of about 2% of GDP every year and assuming a base oil price of $50 a barrel. Once again, the gap will be filled with taxes, from VAT on cross-border online purchases and a new windfall tax on mining companies. Meanwhile, defense and the war remain the budget’s “strategic priority.”
The Iranian Cushion
Without the war in the Middle East, things would be even worse. When the Strait of Hormuz closed in the spring, oil rose above $100 a barrel, and Russia’s budget automatically collected more taxes. According to Bruegel, a Brussels-based economics think tank, this brought Russia about 13.5 billion euros from March through June alone. The price cap imposed in 2022 was meant to prevent exactly this: it bars Western insurers, shipowners, and ports from servicing Russian oil sold above the set threshold. But the cap works only where Western services are needed. Oil that Russia ships via its shadow fleet, with its own insurance and through intermediaries outside the jurisdiction of the price-cap coalition countries, sells at market prices, so when global prices soar, so do Russian revenues. But this cushion does not depend on anything the Kremlin does.
After the June U.S.-Iran agreement, the price of Brent crude, a global oil benchmark, fell to $72 a barrel. In September, the Houthis seized the coastline near Bab el-Mandeb, drone strikes shut down Saudi Arabia’s main pipeline, and oil rose above $100 again, for the first time since mid-May. Each such cycle of escalation and de-escalation erodes the bonus, as the market gradually adjusts to volatile U.S.-Iran relations and price spikes grow weaker.
In essence, Ukraine is trading its most effective pressure on Russia for protection from Russian strikes this winter.
Long-Range Sanctions
While Washington procrastinated, Ukraine imposed “sanctions” of its own, kinetic ones. In June, Russian refineries processed 3.8 million barrels of oil per day, 30% less than a year earlier and the lowest level in more than 20 years. In August, after a record number of Ukrainian strikes, the amount of oil Russian refineries processed fell to the low levels of June. By one estimate, below 3.3–3.5 million barrels Russia will no longer be able to supply its own market with fuel. Drones increasingly targeted, not storage tanks, but the units that turn crude into gasoline and diesel. Minor refinery problems can be fixed in a week or two, but major repairs can take six to eight months, partly because Western sanctions restrict access to spare parts. The result is a “double strike”: drones knock equipment out of service, and sanctions slow its repair. The most critical target is the crude distillation unit, through which all crude entering a refinery passes: without it, the refinery effectively stops. After one August strike on the Perm refinery, only 28% of its primary processing capacity remained operational.
The consequences are already visible. Gasoline output is down 20%, diesel almost 30%. Russia banned diesel exports, began importing gasoline from India and Kazakhstan, and allowed the sale of outdated Euro-2, Euro-3, and Euro-4 standard fuel until 2027. Seaborne diesel exports in August were 81% below the five-year average. Crude output fell 1.2 million barrels per day below the OPEC+ quota: with refineries down and export terminals and tankers also under attack, oil that cannot be refined has fewer places to go. And every barrel not produced is tax revenue not collected.
Novorossiysk: The Kazakh Cover
In Novorossiysk, Russia’s main Black Sea port, two oil terminals operate side by side. One belongs to Russia’s state-owned Transneft. The other serves the Caspian Pipeline Consortium, through which Kazakhstan exports most of its oil and whose owners include Chevron and ExxonMobil. After the July strikes near the Kazakh terminal, U.S. Vice President JD Vance asked Kyiv to avoid non-Russian tankers, and Ukraine agreed, introducing “white lists.” Moscow responded pragmatically: it began loading more Kazakh oil in Novorossiysk, betting that Ukraine would leave ships carrying it alone. In August, Russian oil accounted for less than half of the loadings scheduled there.
This is where the problem for the Graham Act arises. It, too, exempts from sanctions non-Russian oil that transits Russia, but, unlike the Ukrainian arrangement, it does not require any verification – neither of the cargo’s origin nor of who owns the vessel. Moscow is already mixing Russian and Kazakh cargoes in Novorossiysk, so without proper checks part of Russia’s exports could pass under the U.S. exemption. Kazakhstani and American companies should not have to pay for Russia’s war, but an unchecked exemption becomes a loophole for Russia itself.
The Bargain
Washington’s motive is clear: in September, diesel in the United States cost a record $6.23 per gallon, and the midterm elections are fast approaching. On 22 September, after Zelenskiy met Trump in New York, Kyiv turned this pressure into its own proposal: Ukraine would stop attacking Russian refineries if Russia stopped striking Ukraine’s power grid and water supply. The United States promised to pass this on to Moscow, and, according to Zelenskiy, he received no demands to stop unilaterally.
Even if the Patriot license is granted, domestic production will not start for a year to a year and a half, by Zelenskiy’s own estimate.
The strikes continue. Patriot missiles are on the table as well. Ukraine took the decision in July not to hit Kazakh tankers partly in hopes of obtaining a U.S. license to produce these missiles, according to the FT. In September, the license was discussed again alongside the energy truce: Trump did not reject it, but did not approve it either. Separately, Kyiv is asking for interceptors from U.S. stockpiles this winter in exchange for missiles it will receive from Germany in 2027–2028. In essence, Ukraine is trading its most effective pressure on Russia for protection from Russian strikes this winter.
For Kyiv, this is a very hard choice. Strikes on refineries hurt Russia’s budget the most, while halting them could offer a chance to keep the heat and lights on during a winter that, according to early forecasts, may be harsh.
There is already a negative precedent: in February, according to Zelenskiy, Russia used a brief pause in strikes to stockpile missiles, then hit Ukraine’s energy sector with a record number of ballistic missiles, leaving cities without heating in freezing temperatures. Unlike Russia, Ukraine cannot stockpile interceptors. Even if the Patriot license is granted, domestic production will not start for a year to a year and a half, by Zelenskiy’s own estimate. And the joint European Freyja anti-ballistic missile defense system is still in testing: a working prototype is planned by mid-2027.
SpaceX’s Starlink is a separate issue. Since the summer, Kyiv has been seeking permission to use the satellite network to guide long-range drones over Russian territory. According to the FT, Elon Musk allowed for this possibility, provided the White House agreed. During the 22 September meeting, Zelenskiy raised the issue again, but, according to reports citing a Ukrainian source, Trump suggested discussing it directly with Musk. As a result, neither Starlink nor the White House has made a decision so far. This does not significantly affect strikes on refineries: drones can hit large stationary targets using onboard navigation. However, access to Starlink would make it possible to strike mobile targets, including ballistic missile launchers, and thereby partially reduce Ukraine’s dependence on Patriots.
Russia enters the fall with a deficit already one and a half times its annual target, a debt market that refuses to lend to it, and an oil industry that is being methodically put out of action. The country’s finances are kept afloat only by a temporary windfall from someone else’s war. All this, and now the Graham Act, opens a window for Washington and Kyiv to increase economic pressure. Congress has done its part: sanctions are now almost impossible to lift without a genuine peace. But the sanctions law guards against rollback, not against inaction: it cannot force the U.S. administration to use the tools it provides.
Whether the law becomes a real instrument of pressure or mainly a safeguard against rolling that pressure back will become clear after 18 October. As noted, Ukraine, for its part, enters the winter with an acute shortage of Patriot missiles, but with cards of its own: long-range sanctions that may help it bargain for light and heat in Ukrainian homes.
Valerii Kravets is a Bucharest-based senior program coordinator for the GMF Black Sea Trust. He focuses on Ukraine-related programming and supports initiatives aimed at strengthening electoral integrity across the Eastern Partnership countries.
