Russia’s governing body announced, with an air of triumph, a much-anticipated reversal of their seaborne diesel exports’ prohibition on Friday. The restriction, imposed from September 21, had barred diesel and gas oil’s outflow through pipeline-fed seaports. This measure was a reaction to escalating domestic prices, an unanticipated byproduct of refiners orienting their sales towards lucrative international avenues. This shortage and the consequent price inflation threatened to spark political unrest in the light of the oncoming March presidential elections.
Fueling Domestic Recovery: A Rebalance in Favor of Home Markets
However, this pivot in policy doesn’t imply an absolute freedom for diesel exports. The Kremlin explicates that the ever-flowing oil export stream must be brought under control to ensure equilibrium in the local market. Now, diesel producers can export unhindered, as long as they cater to domestic demand by providing at least half of their yield to local markets. With diesel considered Russia’s premier export in the oil products sector, this regulation could act as a safety net against further domestic shortages. Tallying nearly a million barrels per day, 75% of Russia’s diesel export is seaborne, delivered via intricate pipeline networks.
Supporting Refiners and Maintaining Domestic Fuel Demand
The Russian government has gone a step further to normalize the domestic fuel situation by reintroducing full subsidies for refiners. It restored the fuel damper coefficient, designed to offer compensation for losses sustained by oil refineries in domestic fuel sales. With this move, domestic fuel demand is slated to be more reliably met, ensuring a balanced local market.
Keeping the Grey Market at Bay: The Introduction of Protective Duty
In an effort to regulate the potential for covert or ‘grey’ exports, the government has imposed a protective duty. This added cost of 50,000 roubles per tonne extends only to petroleum product resellers, not direct producers. The Kremlin views this step as crucial to preemptively halt attempts at underhand exports, keeping wholesale prices in check, and maintaining a stable retail calculation.
This comprehensive policy alteration acts not only as a deterrent for resellers seeking to exploit lifted restrictions but also curtails potential attempts to export premium-grade fuel under the guise of lesser-grade products. The Kremlin reiterated, “We aim to suppress any opportunistic maneuvering that may arise with the lifting of current restrictions, ultimately ensuring stability and fairness in the fuel market.” This multi-pronged strategy seeks to balance export profits with domestic demand, bringing a semblance of calm to the stormy seas of the recent Russian fuel crisis.
