Kremlin blames bad faith and speculation for its fuel shortage

Russian President Vladimir Putin proclaimed victory on Monday on the economic front. "The recovery phase of the Russian economy is over. We have resisted absolutely unprecedented external pressures," the president said to the four winds. Four days later, his government, which runs one of the world's largest oil producers with an iron hand, banned the sale of gasoline and diesel abroad because its farmers have no fuel for winter crops. Russian authorities, like those in Venezuela in the late 2000s, say the national energy crisis is the fault of speculators and bad faith by businessmen.

The shortage of diesel has highlighted the imbalances facing the Russian economy. Locked in an increasingly costly war, the Kremlin has squeezed its hydrocarbon companies to finance a military machine that will devour nearly half of the state budget this year, according to reports seen by Reuters. For their part, farmers claim that they have no fuel for their machines.

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Russia bans diesel exports under the pretext of shortages and further strains prices

Likewise, the sanctions have emptied the country of dollars, euros and other currencies, which has skyrocketed its price to be able to import and has greatly devalued the ruble. According to Deputy Energy Minister Pavel Sorokin, "the difference between the domestic price (of fuel) and the alternative of exporting it is very significant; now it exceeds 20,000 rubles (195 euros) per ton."

All this has caused an inflationary spiral in the country: more expensive imports, more expensive fuel, much more expensive products in stores. The solutions advocated by the authorities and the oil companies differ substantially.

"The government has not responded in time to the changes in the world market caused by the increase in oil prices," Putin said at the Eastern Economic Forum held on September 12 in Vladivostok. "I spoke with Igor Ivanovich Sechin (director of Russia's largest oil company, Rosneft). He has his own position, but the executive and the producers have generally agreed on how they will act next," the Russian president added.

While Putin demands to square the circle with cheap fuel for Russians and greater income from its sale abroad, Sechin advocates boosting exports to balance the economy. The Kremlin raised its taxes on oil companies after the West imposed a cap on a barrel of Russian crude transported by sea, and the head of Rosneft has called for Russian railways to transport oil instead of coal to Asia to evade these sanctions.

The Kremlin rejects this measure and bets on increasing taxes on oil companies to force them to sell more to the domestic market, which pays with a ruble of uncertain future. The Government and the sector have been negotiating for months the rate for export duties on petroleum products. On September 15 it was learned that the Executive wants to raise it to $ 250 per ton compared to $ 6.4 per ton of light products (gasoline, diesel) and $ 24.1 of dark (fuel oil, tar).

In the end there was no agreement and the Kremlin has taken the most drastic measure in the face of the shortage problem: temporarily prohibiting the export of fuels until the oil companies agree to an agreement on the tax. In fact, the Government does not hide its pressure on the sector. According to the newspaper Kommersant, the Executive has proposed to return part of the tax to companies that "in good faith" supply the domestic market as requested by the Kremlin.

"It (this measure) has been adopted indefinitely. We expect the market to feel its effects quite quickly, but it will depend on the saturation of the market and its results," Sorokin said in an interview with Rossiya 24 on Friday.According to the order of the Ministry of Energy, "the restrictions will make it possible to curb the gray export of fuels."

An oil-free country without fuel

The crisis began to brew in spring, when the national currency began to plummet from the threshold of 60 rubles to the dollar to reach the psychological level of 100 to 1, and oil rose in price on international markets. According to Russian statistics agency Rosstat, the cost of fuel has risen 9.4% in the retail market since the start of the year.

The liter of gasoline 95 and diesel were worth last week 56.2 and 63.9 rubles on average (0.55 and 0.63 euros), lower prices than in Europe, but high for an oil power where a third of the population earns less than 27,000 rubles per month (264 euros) and another third between that figure and 440 euros.

The market's first reaction to the restrictions has been remarkable. The prices of gasoline and diesel have plummeted this Friday by 9.5% and 16%, respectively, on the St. Petersburg Stock Exchange.

However, the biggest problem has not been the increase in fuel prices, but its lack. The Minister of Agriculture, Dmitri Patrushev, denounced on September 6 that there were not enough reserves for the next harvest season and "a disaster" was looming if this "problem that cries out for it" was not solved. In fact, the senior official asked to veto the export of fuel during his speech in the State Duma.

Shortages of fuel and lubricants are severe in Russia's southern and Far Eastern regions, the country's breadbaskets. "The supply of diesel is intermittent, there is no stock even in the warehouses where we always buy," the head of the agricultural company Raduga, Alexei Résik, told the Interfax agency.

This company operates in the southern region of Rostov, where the climate favors winter harvests. The Ministry of Agriculture of that oblast has reported that its fields only have 37,000 tons of diesel, which barely covers 38% of their needs.

Other regions, such as Udmurtia, Saratov and Dagestan, have also called since summer for a ban on fuel exports. In addition, farmers note a much higher price than that recorded in Rosstat statistics.

"The fuel ratio used to be up to 20% in the cost of winter wheat. By the 2024 harvest it could reach 40%," adds Résik. In addition, to this must be added the increase in the price of transport and tariffs, which translates into an increasingly high inflation in stores.

Illegal gas stations in vans

Another problem facing Russia is the black market as sanctions take their toll. It is not uncommon to find in the provinces the sale of all kinds of products, and this includes fuels, a business that has flourished in recent months.

The Russian Fuel Union warned at the beginning of summer of the appearance of thousands of mobile gas stations throughout the country. Specifically, buses and vans of the GAZelle model converted into service stations and depots in private estates where security measures are conspicuous by their absence.

According to the sector, there would be between 1,500 and 5,000 illegal points of sale throughout the country, especially in the agrarian south. The reason for this boom in gas vans is due to the difference between wholesale and retail prices: while legal service stations have less room for maneuver and can suffer losses for a while, the black market can speculate and stop selling when it does not compensate. Meanwhile, inflation, little by little, is passed on to Russian consumers.

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