Anticipating possible fuel shortages, particularly diesel, the Brazilian government is considering importing the fuel from Russia. Currently, only Petrobras imports diesel from India, the country which is refining Russian oil. Brazil's foreign ministry is already helping private companies with the necessary accreditation for such operations through Abicom, the fuel importers association.
However accessing to Russia/India oil is not easy, since banks are not interested in opening a letter of credit for Russian import operations, fearing reprisals due to the international boycott after Russia’s invasion of Ukraine. Banks are also unwilling to receive payments for operations paid for in a single installment by companies in Brazil.
Because of these hurdles the Brazilian embassy in Moscow is dealing with potential Russian exporters, and working at diplomatic level for authorization to confirm such deals, as it has done successfully so far with fertilizer purchases.
Brazil estimates it needs to import between 228 million and 454 million liters of S-10 diesel per month (2.37 billion liters in the year’s second half) in addition to what Petrobras produces and imports. Overall, the estimated diesel deficit from July to December is almost 3 million cubic meters.
According to an agreement between Petrobras and the Ministry of Mines and Energy, the oil giant is committed to importing 2,925,000 cubic meters of fuel from July to December, and between September and October, it will import 1,225,000 cubic meters. But it is insufficient, Brazil consumes more than 5 million cubic meters per month.
Petrobras and many fuel distribution companies participated in a meeting at the beginning of the month at the Ministry of Mines and Energy, which assessed the need for Brazil to increase imports by over 15% to meet domestic needs. But with the price gap between domestic and international markets, private importers abstained from registring to import diesel.
However, given the international situation, the Brazilian government has some positive points, first the fact that the Bolsonaro administration is aligned with Russia's Putin concerning the war conflict; secondly and most important, Russian prices are lower, even when India is charging Petrobras the international price.
Abicom estimates that imports from Russia would still be competitive for private companies in Brazil, since the price gap with domestic stands at 8%. In other words importing 3 million tons of Russian diesel in the second half of the year should not be a problem. The problem is how to make payments with Russia banned from the global financial circuit.
Not to mention how the US and the European Union micht react, although BRICS country members, including China, India, South Africa, have called for an end to the war, to contain adverse economic impacts on the most vulnerable populations. Brazil also points out that several European countries continue to be supplied gas by Russia's Gazprom.
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