Belarusian fuel leaves Russia due to reduction of subsidies

As it became known to Kommersant, the reduction of budget payments for the damper by half threatens to leave Belarus from the Russian fuel market. Since the end of last year, such supplies to the SPIMEX exchange have been going through the trader Promsyrieimport, which receives payments under the damper. But now the reduction in payments will make such operations unprofitable. According to Kommersant’s interlocutors, Belarusian diesel fuel makes up a significant share in exchange sales and its possible withdrawal has already led to an increase in wholesale prices to record levels.

Belarus may significantly reduce or completely stop the supply of fuel to the domestic market of the Russian Federation after cutting the damper by half from September, Kommersant’s interlocutors in the fuel market expect. Since the end of last year, Belarusian refineries have been supplying fuel to the SPIMEX exchange through the state-owned Russian trader Promsyreimport (see Kommersant dated October 26, 2022). Thus, refineries sell gasoline and diesel fuel to Promsyrieimport, which then sells the purchased volumes through the stock exchange at domestic Russian prices. To compensate for the gap between the purchase price and the domestic price, Promsyrieimport receives damper payments from the budget. According to the company’s statements for the past year, it received over 1 billion rubles. in the form of damper payments, with deliveries starting only in October. The Ministry of Energy of the Russian Federation declined to comment.

In September, according to changes to the Tax Code, damper payments will be halved. This means that the purchase price of “Promsyryeimport” will be reduced, which will make such supplies unattractive for Belarusian producers at the current level of domestic prices in Russia. According to several interlocutors of Kommersant, Belarusian refineries will redirect the volumes supplied to the Russian Federation for export to non-CIS countries through the Russian ports of the North-West.

Fuel deliveries from Belarus to Russia in the last year were not too large compared to the volume of the entire market, but they accounted for a significant share of exchange sales and thus influenced wholesale fuel prices. According to Kommersant’s interlocutor in the industry, in recent weeks Belarusian suppliers have sold 1.2-4.9 thousand tons of diesel fuel and 0.6-1.14 thousand tons of gasoline per day, that is, they accounted for up to 4% and 14% of sales of these types of fuel at SPIMEX, respectively.

The cessation of fuel supplies from Belarus may create additional tension in the fuel market, especially in the diesel fuel segment. So, on August 4 and 7, the cost of diesel fuel at SPIMEX updated absolute records: on August 7, it went up by 0.5%, to 60.4 thousand rubles. per ton. Two Kommersant sources believe that the increase in prices is mainly due to growing demand and the expectation of the withdrawal of Belarusian goods.

The scheme with the supply of diesel fuel from Belarus with the participation of Promsyreimport was invented in 2022 to replace its shortage in the Russian Federation. Prior to this, only Russian refineries received payments under the damper from the Russian budget. In September 2022, the government ordered to give Promsyrieimport the right to sell gasoline and diesel fuel in the Russian Federation, which are produced by a “foreign organization”, and also to apply for a damper.

The criteria for a “foreign organization” included the Belarusian Belneftekhim, which owns the Novopolotsk and Mozyr refineries, which stopped supplying fuel to Europe due to sanctions. Subsidized fuel deliveries to the Russian Federation against the backdrop of sales problems were also intended to help the Belarusian budget, a significant share of revenues in which depends on revenues from sales of petroleum products. The export of oil products from the country was seriously affected by the outbreak of hostilities in Ukraine. Prior to this, Minsk provided the country with 45% of imported gasoline and 37% of imported diesel fuel.

Sales of AI-95 gasoline at the Mozyr Oil Refinery “are not of a regular nature,” says Mikhail Turukalov, an expert on the fuel market: the product was on the market in June, then there were no sales for about three weeks and the supply was restored from July 17. From July 17 to August 4, the share of the Belarusian AI-95 in exchange sales amounted to 6.4%. But it is important to note, the expert says, that this product competes mainly with the product of refineries in Central Russia and the influence of the Belarusian AI-95 on the market in the region is much higher. According to his estimates, the payment of the damper for this period may exceed 400 million rubles. From July 1 to August 4, 56.2 thousand tons of Belarusian diesel fuel were sold on the stock exchange, its share in the total volume amounted to 4.3%, Mikhail Turukalov notes. The damper payment for the supply of this product to the Russian market in July may amount to about 1.7 billion rubles.

Dmitry Kozlov