Importers claim Russian diesel purchases are unfeasible

Russian suppliers approached the Brazilian Association of Fuel Importers (Abicom), intending to secure contracts in the country. However, according to the president of Abicom, Sérgio Araújo, international sanctions deterring payments make diesel purchases unfeasible.

For him, Russian diesel purchases would require a diplomatic agreement with the United States, which is unlikely. “Banks have operations that involve the US economy, so obtaining a kind of ‘waiver’ with the US Treasury,” he said.

Earlier this week, President Jair Bolsonaro said that Brazil is negotiating the purchase of diesel produced in Russia, a country that, since it invaded Ukraine, has been under sanctions from Europe and the United States.

According to a report formulated by S&P Global Commodity Insights consultancy, a contract for Brazil to buy diesel from Russia would have to provide a significant price cut to offset Western political pressure against the decision. According to the consultancy, this strategy makes sense for a few Latin American countries, besides Russia’s traditional allies in the region, such as Cuba, Nicaragua, and Venezuela.

A source interviewed by S&P in the fuel trading sector also confirmed that there would be problems for Brazil to pay for the cargoes. “How do you pay if banks cannot transact with Russian companies?” he said.

However, the source pointed out that Russian oil is indeed traded at deep discounts. For example, the Russian barrel was recently sold at a discount price of US$ 36 per barrel against Brent, the main international price for the commodity. The difference between the Russian price and the Brent was less than US$ 5 before the war in Ukraine.

S&P Global points out that purchasing Russian diesel could reduce Brazilian imports from the United States, which is usually more expensive. Brazil imports around 25% of the diesel consumed in the country, as national refineries cannot meet all the demand. Traditionally, the American Gulf of Mexico region supplies most Brazilian imports.

According to S&P, the United States delivered 54% to 71% of the total diesel imported by Brazil in the last three months. In the same period, Brazil also purchased fuel from countries such as Saudi Arabia, the United Arab Emirates, and India. As a result, Brazil is the second largest export destination from the American Gulf, after Mexico.

Source: Valor Econômico

To read the full original article, please go to: https://valor.globo.com/brasil/noticia/2022/07/14/compra-de-diesel-russo-e-inviavel-dizem-importadores.ghtml

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