Russia’s losses from “gray” gasoline exports have been calculated

The budget may lose up to $1 billion due to semi-legal methods of trading in petroleum products

The main reason for record wholesale prices for gasoline and diesel on Russian exchanges this year was the high volume of “gray” exports of petroleum products, which, according to Energy Minister Nikolai Shulginov, reached “several million tons.” The Energy Department is working to block semi-legal channels for the exit of petroleum products from the country, but so far it has not been very successful. Total losses from commercially questionable supplies of motor fuel abroad can reach up to a billion dollars a year.

According to Shulginov, ordinary speculators are trying to make money on “gray” fuel exports from Russia, who buy gasoline at a reduced domestic price, taking into account the state damper paid to producers, and then sell fuel to the foreign market at an inflated price.

The scheme works as follows. Small companies directly at gas stations or local raw material bases buy petroleum products intended for the domestic market, reducing the supply for domestic car owners. Fuel is transported abroad by rail or ordinary fuel tankers. On the one hand, “gray” supplies are declared by Russian customs along with all other exports of petroleum products and are not prohibited by law. On the other hand, speculators trade goods, the cheap price of which includes government payments to large oil companies for maintaining stable retail prices in the domestic market, and thus receive undeserved profits.

Moreover, as officials believe, it was precisely such operations that caused a rapid rise in prices on the country’s commodity exchanges: if in January the cost of AI-95 was 38.33 thousand rubles per ton (diesel – 40 thousand rubles), and in September gasoline tariffs increased up to 75.5 thousand rubles (diesel – up to 71.7 thousand rubles). “Of course, “gray” exports must be limited. The corresponding document will appear soon. The details are now being worked out to ensure that this step is most effective,” the minister promised.

The priority among the measures being considered to limit “gray” fuel exports is “the creation of a list of authorized exporters of manufacturers and suppliers to the domestic market.” The preliminary draft of the updated concept of foreign sales of fuel, presented by the Ministry of Energy at the end of July, stipulates that the list of companies that will have access to trading on foreign exchanges will, first of all, include large raw materials holdings that will be able to sell petroleum products within the established quotas. “Similar lists will be created for companies supplying the national market. In this way, officials are trying to regulate the volume of supplies for export and for domestic needs in order to prevent the formation of a fuel shortage, leading to an increase in prices on the domestic exchange,” explains economist, BitRiver Communications Director Andrei Loboda.

It is worth noting that the proposed plan, although clearly designed in favor of leading mining concerns that own powerful refineries, is still a softer option for controlling the sale of Russian gasoline and diesel to foreign buyers. Just a few days ago, the Ministry of Energy informed that the government was considering long-term measures related to a partial restriction of the export of petroleum products. The initiative was born after reports from Russian regions – Krasnodar Territory, Orenburg, Altai and other regions – about the lack of motor fuel in the midst of harvesting. Authorities first associated the resulting fuel shortage with planned refinery repairs and gaps in transport logistics, and then laid the blame entirely on market speculators who are inclined to make quick money and do not hesitate to participate in “gray” fuel exports. Hotheads immediately began to talk about the impending complete stop of foreign supplies, but the prohibitive measures developed, apparently, will not apply to commodity majors.

According to Freedom Finance Global analyst Vladimir Chernov, it is quite difficult to name the exact volumes of “gray” fuel exports from Russia, since official statistics on shadow transactions, of course, are not kept. “However, the approximate monthly volumes of IA-92 and diesel fuel sent from our country by resellers are estimated at a total of 1 million tons, which is approximately 1-1.5% of the total supply of the corresponding types of fuel to the domestic market,” says expert. “Russia’s direct financial losses from the “gray” export of petroleum products seem small, but even because of this “stolen” percentage, wholesale fuel prices on the commodity exchange are rising, which increases the cost of all transportation and accelerates inflation.”

In turn, Andrei Loboda believes that the volume of “gray” fuel exports from Russia can reach up to 5 million tons per year. According to the government decision, from July 1, 2023, a non-producer fuel exporter will have to pay an additional 20 thousand rubles per ton of gasoline or diesel sold abroad. These payments will concern petroleum products that have already passed through the damper system, that is, for which the state has already paid compensation. If we assume that “gray” exporters manage to export all five million tons, then their profit hidden from the treasury will amount to 100 billion rubles or more than $1 billion. “Although at first glance the volumes of commercially questionable trade transactions do not seem critical, they should not be underestimated : for unscrupulous businessmen, they turn into profits of hundreds of millions of dollars,” the expert notes, “Meanwhile, every additional ton that leaves Russia through “gray” export routes contributes to the shortage of petroleum products on the domestic market and, accordingly, to rising prices for fuel at our gas stations.”