Sanctions and commodities: how embargoes reroute trade

Published 2026-09-05; updated 2026-09-05.

A sanction is a legal restriction on dealing with a country, entity or product; an embargo is the strongest version, a ban on the trade itself; and a price cap is a targeted variant that allows the trade to continue but only below a stated price. In commodity markets all three tend to produce the same first-order result: the goods keep moving, but to different buyers, along longer routes, at a discount to the benchmark. Removing supply from the world is much harder than removing it from one customer.

Why does an embargo reroute trade instead of removing it?

Because most traded commodities are fungible. A barrel of crude of a given quality is worth the same to any refinery configured for it, and grain of a given protein content feeds anyone. If one group of buyers stops purchasing, the exporter is not left with an unsellable product; it is left with a product that must be sold to someone else, and the price adjusts until someone else takes it. This is arbitrage doing its ordinary work under unusual constraints.

The adjustment shows up in four places. The first is the differential: the discount the sanctioned exporter accepts against the benchmark, which is the price of the buyer’s extra risk and inconvenience. The second is freight. When cargoes that used to sail a few days now sail a few weeks, the same fleet carries less, and tanker demand rises without any change in the volume produced. The third is intermediation. Banks, insurers and shipowners in the sanctioning countries withdraw, often more cautiously than the rules require, and are replaced by others; this self-sanctioning is frequently a larger practical constraint than the legal text. The fourth is transformation. Crude refined in a third country becomes that country’s product, and metal remelted or blended acquires a new origin, so restrictions on a raw material rarely follow it through processing.

A price cap is designed around exactly this behavior. Rather than banning the trade, it permits shipping, insurance and financing services from the participating countries only when the cargo sells below a stated price, aiming to keep the volume flowing while limiting the exporter’s revenue. The G7 and European Union cap on Russian-origin crude took effect for cargoes loaded from 5 December 2022, with a separate date of 5 February 2023 for refined petroleum products (US Treasury, OFAC FAQ 1094).

Food and fertilizer are usually treated differently, because the humanitarian cost of restricting them falls on importing countries rather than on the sanctioned exporter. Metals sit in between: measures there tend to target who may buy, deliver or warehouse the metal rather than banning its production, so the metal continues to be produced and finds a route to consumers outside the restricted channels.

A schematic of the standard outcome: the same barrels reach a different buyer, later, at a discount, using more of the world’s shipping.

A worked example

The trade data two years after the 2022 measures shows the pattern clearly. In 2024, world exports of crude petroleum under HS 2709 were worth $1,324 billion, and Russia supplied 9.4% of that value, second only to Saudi Arabia at 14.1% and ahead of the United States at 9.3%, the United Arab Emirates at 8.6% and Canada at 8.2% (CEPII BACI). On the import side the same year, China took 24.0% of world crude imports by value, the United States 12.8% and India 10.7%. Russia also supplied 5.1% of the $884 billion of refined product exports and 8.5% of the $476 billion of petroleum gases traded under HS 2711 (CEPII BACI). These are the shares of a large exporter, not of one that has left the market.

Prices behaved accordingly. Brent crude averaged $91.1 per barrel in November 2022, $80.9 in December 2022, the first month of the crude price cap, and $83.1 in January 2023 (World Bank Pink Sheet). Across 2023 as a whole Brent averaged $82.63 per barrel against $99.83 in 2022. A measure aimed at one of the two largest crude exporters in the world was followed by a lower oil price, because the barrels were still sold, and because the cap was designed to keep them flowing.

Wheat makes the food exemption visible. Russia supplied 15.8% of the $57.5 billion of world wheat exports by value in 2024, the largest share of any country, ahead of Canada at 13.6%, the United States at 11.7%, Australia at 9.9% and Ukraine at 8.3%, while Egypt took 9.0% of world imports (CEPII BACI). Grain from a country under extensive financial sanctions remained the world’s largest wheat export flow, which is what a carve-out for food looks like in the data.

Metals show the third pattern, the one where restrictions attach to the channel rather than the cargo. Russia supplied 9.1% of the $79.3 billion of unwrought aluminum exported in 2024, behind Canada at 10.4% and the United Arab Emirates at 9.3%, while the United States took 14.1% of world imports and China 9.8% (CEPII BACI). Restricting which exchanges and warehouses may accept a metal changes where it is delivered and what premium it earns in each region; it does not stop a smelter from running, because a smelter that is switched off is expensive to restart.

The general lesson for reading a market under sanctions is to watch three numbers rather than one: the benchmark price, which often moves least; the differential the sanctioned grade trades at, which is where the exporter’s loss appears; and freight, which absorbs the extra distance. The underlying flows are on the crude oil origins page, the wheat origins page and the aluminum origins page, with prices on the crude oil price page. For the episode that prompted most of these measures, see the 2022 energy shock; for who physically moves the rerouted cargoes, see who trades commodities.

Cite as: Commodity Origins, "Sanctions and commodities: how embargoes reroute trade", https://commodityorigins.com/learn/sanctions-and-commodities/ (CC BY 4.0).