From crude to rice: The long tail of US sanctions

Highlights:

• US sanctions target Russia and Iran, but affect third countries
• Foreign banks and businesses face penalties for sanctioned transactions
• Energy restrictions can raise global oil and transport costs
• Food and fertiliser disruptions could increase costs for consumers
• Bangladesh faces risks involving Russian oil, fertiliser and Rooppur
• Sanctions and tariffs could reroute global trade and partnerships

US President Donald Trump signed the Russia-Iran sanctions bill into law on 18 September, with most measures due to take effect within 30 days. The law lets the president impose tariffs of up to 100% on imports from the largest buyers of Russian energy. It also extends the 1996 Iran Sanctions Act through 2031, as the US Treasury expands penalties on Iran under its new Operation Economic Outcast.

The target is Moscow and Tehran. The reach is far wider. The measures are built to work through third parties: foreign companies, banks, shippers and, now, entire countries that keep dealing with the sanctioned.

Compliance by default

A Bangladeshi wheat or fertiliser importer, a Chinese refinery, an Indian oil buyer, a Turkish trader, a UAE shipping firm or a European bank may have no intention of breaking US law. Yet any of them can be exposed if a transaction touches Russian or Iranian energy, finance or shipping.

Infograph: TBS

Banks are the clearest example. A lender need not be Russian or Iranian to be penalised. Financing, clearing, insuring or facilitating a deal involving a sanctioned entity is enough. The rules also cover foreign-flagged "shadow fleet" tankers, cutting them off from maritime insurance and financial services.

The effect goes beyond formal prohibition. When enough banks, insurers and shipping lines decide the risk is not worth it, sanctioned cargo stays physically available but becomes slower, costlier and riskier to move. Private firms over-comply to protect their access to the dollar system, and that tightens the squeeze further.

Energy: the clearest spillover

Iran, Russia and Venezuela are major energy producers, and all have been under heavy US and allied sanctions for years. The costs fall unevenly.

Take a hypothetical. Bangladesh buys Russian crude because it is cheaper. Washington threatens tariffs on Bangladeshi exports, and Dhaka retreats to pricier suppliers. The Russian oil does not vanish. It is redirected to buyers who can afford to ignore US pressure, and they capture the discount. According to the Atlantic Council Energy Sanctions dashboard, China saved as much as $28.8 million a day on Russian crude at the peak of discounts in 2025. More recently, Washington has eased some restrictions on Russian and Iranian crude to ease shortages, particularly for Asian buyers, and Russia has since supplied more to India and Southeast Asia.

Bangladesh has been unable to join that discount market. After Western sanctions followed the Ukraine war, the then government said the country lacked the capacity and technology to refine Russian crude. Dhaka therefore bears the cost of compliance without the benefit of evasion.

Nor is the damage limited to buyers. If Russian supply becomes harder to trade, global prices rise, and a country that never bought a barrel of Russian or Iranian oil still pays more for crude from other sources. That feeds into transport, electricity, plastics and manufactured goods.

From oil to food

The same mechanism runs through agriculture. Russia and Belarus are major suppliers of fertiliser and related inputs, and Russia is a leading exporter of energy and farm inputs. When financial, shipping or insurance constraints make these goods harder to trade, higher input costs pass along the chain to farmers and then to consumers. The IMF has documented how Russia-related sanctions and corporate responses disrupted commodity flows and amplified energy and food shocks. The ultimate payer may be a farmer or shopper thousands of kilometres from the sanctioned economies, in Asia, Africa or Europe.

Bangladesh's exposure goes further

The risk is not only crude oil or fertiliser. Bangladesh's only nuclear plant, the 2,400MW Rooppur project, is Russian-financed and built by Rosatom, Russia's state atomic energy corporation. Rosatom's role, and Bangladesh's need for a steady supply of uranium fuel, create a potential vulnerability if US measures on Russian nuclear fuel or related financing widen. Sanctions on Rosatom are targeted on leadership, specific subsidiaries and operational frictions like financial transactions, work at the Rooppur plant continues though with rising logistical and financial complications.

A trade order under strain

Unilateral sanctions and retaliatory tariffs are fragmenting global trade and pushing countries to look for new partners.

The US-Canada dispute shows how fast this can move. Trump announced 50% tariffs on about $20 billion of Canadian imports, and Ottawa responded immediately with its own tariffs of 15% to 50%. The US is the destination for more than 70% of Canadian exports, so Prime Minister Mark Carney is now trying to reduce that dependence. Canada struck a deal with China earlier this year and expects to conclude trade talks with India in December. In September the European Union, itself facing US threats of "serious tariffs," invited Canada to become its first associate member. The EU signed a free trade deal with India earlier this year. The dispute also clouds renewal of the US-Mexico-Canada Agreement.

Large emerging economies are in a similar position. On 12 September, BRICS members meeting in India voiced "serious concerns" about unilateral tariff and non-tariff measures that distort trade and are inconsistent with WTO rules, a pointed reference to measures against Iran and Russia.

Goods that remain in demand will continue to find markets. If the WTO is no longer able to keep global trade in order, a new trade regime will take shape. Sanctions and tariffs will not stop global trade; they may simply reroute it.