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What will Russia gain from the diesel deal with the US? And why does Trump even need it? To stabilize domestic prices, in July, Russian authorities banned diesel exports except under intergovernmental agreements with Central Asia and Mongolia. In theory, the export ban could have allowed for the accumulation of approximately 2 million tons of diesel fuel since then, but this likely hasn't happened. Judging by tanker loading data from Russian ports, seaborne diesel exports have continued unabated: 1.6–1.8 million tons were shipped by sea during these months, possibly under different customs codes for products permitted for export. Most likely, this was happening with the knowledge of the Russian authorities, but they chose not to interfere. After all, Russia has limited diesel fuel storage capacity, and if it were to overflow, they would have to reduce refining volumes, and therefore gasoline production. And that's the last thing the Russian authorities want in a situation of shortage. Nevertheless, the export volumes agreed upon by Russia with Trump are unlikely to pose any significant difficulties. These volumes are 300,000 tons in October, 500,000 tons in November, and a million tons per month thereafter until April 2027, while US sanctions are suspended. The simplest solution for Russian authorities would be to simply reclassify the volumes already exported, despite the current ban. This would allow for the export of approximately 500,000 tons as early as October without removing diesel fuel from the domestic market. Later in winter, diesel fuel consumption in Russia could be 25% lower than in September, with a gradual transition from the August-September peak to the February low. This means up to a million tons of diesel fuel available for export each month. Russian authorities announced a partial lifting of the export ban on October 10. This lifting is unlikely to pose any threat to the domestic market: the government has numerous informal levers to persuade companies to reserve sufficient diesel for Russian consumers. Similarly, OPEC+ production limits are not specified in any law, but Russian companies have been adhering to quotas set by the Ministry of Energy for almost a decade. In fact, Russia doesn't even need to redirect diesel fuel elsewhere from non-Western markets, which have become commonplace in recent years. Europe, which is experiencing a diesel shortage, has no intention of buying Russian diesel anyway, and America itself has no need for it, as the US remains the world's largest diesel exporter. Why does Trump need this deal? The fact is that Trump is not worried about the diesel fuel shortage in the US, but about the high prices for it, which irritate the majority of those who will vote in the midterm elections in three weeks ( we are talking about the congressional elections on November 3 – Meduza’s note ). These are golden days for American refiners who turn crude oil into diesel. While diesel fuel is typically 20-30% more expensive than crude oil, it's now double that, with the refiners pocketing the difference. The US as a country is also seeing a slight foreign trade surplus (a 1-2% increase), so Trump has seemingly nothing to worry about. But in reality, the rest of the American economy suffers from high diesel prices—trucks and shippers, agriculture, and further up the value chain and consumption. Those who suffer from rising prices far outnumber those who benefit. American refiners derive their main profits not from foreign trade, but from rising prices within the United States. This isn't creating value for the country, but simply redistributing it. The US produces more diesel fuel than it consumes, but prices on the US market still rise because they are in equilibrium with global prices. There are no bans or export duties on diesel fuel in the US. Therefore, the only way to lower domestic prices is to influence global prices by increasing supply. The most reliable and radical way to introduce new diesel volumes to the global market is to resolve the Strait of Hormuz issue. Increased supplies from Kuwait, Saudi Arabia, and the UAE would quickly ease market tensions. But Trump is currently unable to achieve a quick victory over Iran, and signing a peace agreement on Iran's terms would be an even greater loss of face and approval ratings. Therefore, he has turned to another war—Russia's war with Ukraine. Will the Russian-American agreements really help lower prices? Essentially, oil and petroleum products are commodities with inelastic demand. Even a small shortage could send prices skyrocketing, and even a slight reduction in that shortage could, accordingly, begin to drag prices down. But 300,000 tons per month is still too little for a global market of 120 million tons per month and its internationally traded share of 30 million tons. And no more will be available before November 3, the election date. Prices could have fallen on expectations that an additional 5 million tons would enter the market in the next six months. But Russian volumes are already factored into market participants' calculations. Everyone understands that Russia exports as much as it can, and Trump has little influence over this. Russia would have exported all its excess diesel anyway, if only because there's nowhere to store it. And there's nowhere to find additional volumes, no matter how much Putin might want to please his American counterpart. Market participants might reconsider if it appeared that Russian refining capacity could return from the current 3.8-4.0 million to 5.5 million barrels per day. But for that to happen, Ukraine would have to stop its attacks on Russian refineries. Kyiv is unlikely to make such a concession, as these attacks are one of the few effective levers it has in its attempts to force Moscow to de-escalate the confrontation. What will Russia get? Will Russia profit from the sanctions suspension? The theoretical value of the entire diesel deal is approximately $7 billion at current prices and with sales volumes of approximately 5 million tons of diesel over six months. This is approximately half of Russia's revenue from oil and petroleum product exports in August 2026. But recording the entire 7 billion as Russia's profit would be a double counting—this diesel would still have been exported, albeit on less favorable terms. Russia would only be able to make money by reducing the discounts it previously had to offer to buyers due to sanctions. True, there hadn't been any significant discount on Russian diesel fuel before—at least according to customs statistics from buyers. Sales to Brazil were less profitable than sales to Europe before the war, mainly due to more expensive shipping. The suspension of US sanctions won't change anything here, as European sanctions on Russian diesel fuel remain in effect, meaning shipping costs will remain high. Without US sanctions, Russia will be able to use vessels from beyond the shadow fleet, which should reduce freight costs somewhat. However, European shipowners will still be unable to use vessels, which will diminish the effect. So, at best, we're talking about a profit of $30-40 per ton of product, or tens of millions of dollars per month—not much money for Russia. Moreover, this money will go not to the state budget, but to companies. The budget will receive only a portion of it, in the form of a tax on the potential increased profits. The Russian authorities also won't be able to allow oil companies to export larger volumes of diesel fuel to take advantage of the situation. This would exacerbate the domestic shortage and be too costly for both the economy and the government's reputation. The Russian budget could surprisingly benefit from lower global diesel prices. Russia's tax system is designed so that public finances receive no benefit from higher prices for exported petroleum products (unlike higher oil prices, which translates into additional budget revenue through the mineral extraction tax). On the contrary, the more expensive fuel is on foreign markets, the more the budget must pay oil companies under the damper mechanism to ensure they sell fuel domestically at regulated prices. And if global diesel prices fall, the damper payments will also fall. Ultimately, without an energy truce with Ukraine, which the Kremlin is unlikely to agree to, the implementation of Putin and Trump's diesel agreements is possible, but will remain largely a façade rather than a genuine increase in the volume of Russian diesel on the global market. Diesel exports from Russia will increase slightly in the coming months, but this would have happened even without the Trump deal due to the seasonality of domestic Russian consumption, which was already factored into market participants' expectations. Moreover, the volumes under discussion are too small to significantly impact global prices, all other things being equal, especially before the midterm elections on November 3. And the monetary effect for Russia as a whole and its state budget in particular is insignificant. https://meduza.io/feature/2026/10/14/chto-poluchit-rossiya-ot-dizelnoy-sdelki-s-ssha-i-zachem-ona-voobsche-trampu Back |
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