In a move to stabilise domestic fuel prices, Russia announced a snap ban on diesel and gasoline exports on September 21, amplifying the strain on an already tight global fuel market and remaking the global supply chains.
Russia temporarily banned the export of gasoline and diesel to all countries outside a group of four ex-Soviet states in September, with the aim of stabilising its domestic fuel market as supplies of diesel to the military surge.
There were widespread reports of shortages in petrol stations across Russia in September as domestic deliveries were rerouted to the south in preparation for the winter season of fighting in Ukraine, according to reports. Russia has significantly increased fuel deliveries to its military units near and inside Ukraine, reaching the highest levels since the invasion earlier this year, Bloomberg reports.
At the same time, the introduction of sanctions on Russia’s oil products introduced on February 5 has seen exports to Europe stop and be rerouted to “friendly countries” outside the sanctions regime, especially BRICS members as the intra-BRICS oil trade flourishes. (infographic)
“Since the start of the war in Ukraine, Russia's 1mn bpd [of] diesel exports have shifted beyond their traditional European market, finding new buyers in Turkey and Brazil – together now accounting for an astonishing 55% of the total Russian diesel exports – as well as in the African continent,” S&P Global said in a note.
Russian diesel exports had come under pressure throughout September even before the ban was put in place, due to domestic refinery maintenance and efforts from the government to increase supply in the domestic market, ING said in a note.
Russia is a crucial supplier of refined products to global markets, with it exporting in the region of 1mn barrels per day (bpd) of diesel. In fact, Russia is the second-largest exporter of diesel, with just the US exporting larger volumes. “As a result, this is a key development as we head into the Northern Hemisphere winter, a period where we usually see a seasonal pick-up in demand,” ING said.
Russia has managed to avoid G7 sanctions on most of its oil exports, a development that will bolster the Kremlin's revenues as crude oil prices surge towards $100 per barrel, the Financial Times reported on September 24.
At a conference in Moscow on September 28, Prime Minister Mikhail Mishustin said “the worst is over” for the economy after Russian Finance Minister Anton Siluanov reported that oil export revenues are now surging and predicted that the government will easily hit its 2% budget deficit target for this year.