Importing diesel from Russia is difficult and does not impact prices, says industry

Presented by President Jair Bolsonaro (PL) as a solution to lower the price of diesel, importing fuel from Russia is seen today as unfeasible by the sector, given the sanctions imposed on the country after the start of the war in Ukraine.

Large fuel distributors and importers consider the risk to be high and there is only one company, from Santa Catarina, with authorization to source diesel from Russian refineries, but the deal has not yet been concluded.

On Sunday (17), Bolsonaro said that there are “very advanced” negotiations with Russia to supply diesel to Brazil at a cheaper price. “How many percent? I don’t know. The cheaper the better,” he said, without elaborating on the deal.

THE Sheet heard companies in the sector that have been participating in meetings with the government on the subject, in a context of trying to guarantee the market supply until the end of the year, but there is great disbelief regarding any favorable outcome.

One of these meetings took place on July 1st, with representatives of the Brazilian and Russian governments, Russian oil companies Rosneft, Gazprom and Lukoil and fuel distributors and importers operating in Brazil.

According to one of the participants, the Russians offered the product, but without detailing volumes or prices. No agreement was sealed during the meeting.

Russia ranks third both among the world’s largest oil producers (behind the United States and Saudi Arabia) and among the countries with the greatest refining capacity (behind the United States and China).

The market worries about the risks of eventual operations. First, because Russia was excluded from the system used by banks for cross-border payments, called Swift. Second, the sanctions prevent insurers and carriers from operating Russian products.

There are also risks of sanctions for companies based, with operations or shares traded in the United States, such as the main global fuel trading companies, or of damage to the image of negotiations with Russian companies while the war lasts.

“Due to the sanctions imposed, imports of products from Russian suppliers are impossible”, summarizes Sergio Araújo, president of Abicom (Brazilian Association of Fuel Importers).

An executive at a major Brazilian fuel distributor adds that while Russian refiners can offer cheaper diesel, high transport costs at the moment would make the product more expensive than Brazil’s main supplier, the United States.

After the beginning of the war, a company from Santa Catarina called Uptime Brasil obtained authorization from the ANP (Agência Nacional do Petróleo, Gás e Biocombustíveis) to import diesel from Russia and is negotiating to bring 25 thousand tons per month, equivalent to 0.02% of the imported volume. across the country in May.

The idea is to close a 12-month contract and, to circumvent the sanctions, the company has been negotiating guarantees and payments by Asian banks, a practice also used by the fertilizer sector, an area in which Uptime also operates, says the president of the importer, Eraldo. Pink.

“I’m not going to change Brazil, I’m not going to be able to lower the price at the pump”, he says. “But it’s important because it’s a start. And with that it will encourage many companies to look for alternatives. Brazil needs it.” The expectation is to receive the first load between 30 and 45 days.

A much larger volume will be needed for the sector so that imports at lower prices have an impact on the average price of fuel in the country. Currently, about 30% of the domestic market is supplied by imported products, the vast majority from the United States.

The price of diesel has become a problem for the government, which has little room for maneuver to force reductions in gas stations, since federal taxes are zero and most states already applied ICMS rates lower than the ceiling established in the end of June.

So, since the bill reducing fuel and energy taxes was enacted, the price at the pumps has dropped by just 1.2%. With higher rates before the ceiling, gasoline has already fallen by 17.8%.