Last December, Morgan Stanley (NYSE: MS) said that it had reached an agreement with Russia’s state-controlled oil company OAO Rosneft to sell the Russian company parts of the bank’s global oil trading business. The deal was supposed to close in the second half of this year, but tensions between the United States and Russia are almost certain to delay the sale, if not kill it altogether.

Morgan Stanley has until the end of the year to win approval for the sale from the Treasury Department’s Committee on Foreign Investment in the United States (CFIUS). The Wall Street Journal cites people familiar with the deal who say the bank has “grown increasingly pessimistic about the deal’s prospects.” The bank and Rosneft presented the deal to CFIUS for approval in July, and it is not known whether the sale was rejected or if the companies withdrew the request.

Recent additional sanctions on Russia have barred foreign oil companies from providing equipment, technology or assistance to Russian firms to support deepwater, offshore or shale projects. Rosneft and Exxon Mobil Corp. (NYSE: XOM) have shut down the first well the two companies drilled off the Arctic coast of Russia in the Kara Sea as a result of the sanctions.

Morgan Stanley’s reason to sell its oil trading assets has not changed. Like most of the big U.S. banks, Morgan Stanley took advantage of a 2003 change in U.S. law that allowed them to own and trade physical commodities, not just contracts on those commodities. When the financial crisis hit in 2008 and 2009, and the banks changed their status from investment banks to bank holding companies, the Federal Reserve began reviewing banks’ commodities business and making it more difficult for the banks to continue trading oil, metals and other commodities.

The Fed is considering imposing a surcharge on bank-owned commodities and warehouses in an effort to get the banks to reduce their investments in the risky and volatile commodities trading business. That is Morgan Stanley’s reason for selling.

The bank, in effect, has been told by one government agency to sell its oil-trading assets, and then prohibited from selling those assets by a different federal agency. The only good thing from Morgan Stanley’s point of view is that the transaction is not considered material to its business.

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