With the northern hemisphere winter approaching and global diesel markets already tight, Russia has banned exports of the fuel that’s used for transportation, heating and industrial processes. Many analysts expect the halt to be temporary, but others see it as another example of Moscow weaponizing energy exports, as its invasion of Ukraine enters a 20th month.
The restriction includes all types of diesel, including summer, winter and Arctic blends, as well as heavy distillates including gasoils, according to the government decree. It came into effect on Sept. 21, but doesn’t have a final date.
Russian barrels sent to Saudi Arabia and Turkey freed up diesel produced in those countries’ own refineries. That’s now being exported to Russia’s former buyers in Europe. It’s not an efficient trade, but it makes sure everybody still gets the fuel they need. Halting Russian supplies to these “friendly” states risks eventually impacting the “unfriendly” ones in the west through higher prices and curtailed exports from countries like Turkey and Saudi Arabia.
Domestic demand is probably being boosted at the moment by a bumper harvest, which needs to be cut and collected. The war in Ukraine and support for the occupied territories is also boosting consumption. The scale of the extra demand to demand is hard to quantify. Those subsidies have been putting a strain on government finances and payments to oil refiners in August rose to the highest in more than a year amid a weaker ruble and higher fuel prices, further straining the budget. The subsidies were halved at the start of September.
However, Russia’s war actions in Ukraine create additional demand. The fuel is needed for military units and consumers in the annexed territories in Ukraine’s eastern region, which have no operating refineries of their own.
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