On April 18, 2019, the Russian Government has adopted Resolution No. 460-25, according to which Russia prohibits the import of crude oil, bitumen, and bituminous mixtures to Ukraine. In addition, from June 1, 2019, the export of coal, gasoline and diesel fuel is allowed only with the special permission of the government. The list of positions also includes “other liquefied gases.” According to experts, the position may apply to autogas. Russian media, citing Prime Minister Dmitry Medvedev, said this was a response to Ukraine’s trade sanctions, imposed against Russia last week. Restrictions on imports to Russia will also affect Ukrainian engineering products, light industry, and metalworking, the cost of which, according to Medvedev, totaled almost $ 250 million over the past year. The list of Ukrainian goods banned for import has been supplemented with pipes, paper, cardboard, shoes, suits, women’s underwear, enamelware.
The most disturbing are energy-related products. This is the first case of such a systematic complex impact, simultaneous with respect to all strategically important types, Serhiy Sapegin, Director of the Psyche Scientific and Technical Center, assures. What will happen if Russia imposes a ban on the export of fuel?
The effect might be very noticeable if the Russian government does not give anyone permission to supply autogas and diesel fuel after June 1. Crude oil is not supplied to Ukraine from Russia. Also, the supply of gasoline from the Russian Federation is insignificant. “The deliveries of autogas from Russia account for a little less than half of all import deliveries - up to 50 thousand tons per month is imported under term contracts,” Serihy Kuiun, A-95 expert, states. The diesel market is also dependent on Russia. Last year, imports of diesel fuel increased by 10.7% to 5.81 million tons, breaking an absolute record. Russia has become Ukraine’s largest supplier of diesel fuel, ousting Belarus, a long-term leader in this area, the OilMarket outlet reported.
A complete ban on the supply of diesel and autogas will provoke a huge shortage and, as a result, a boom and a speculative price increase on the Ukrainian market. Moreover, growth, according to experts, will occur in the segment of gasoline, which is an alternative to autogas. The demand for it will increase dramatically. In addition, the volume of supply of gasoline from the main supplier of gasoline to Ukraine Belarus might be reduced. Russian Federation reduced the quota for the supply of crude oil from 22 to 15 million tons to Belarus, and, if necessary, it can reduce them more significantly, Sapegin said.
Experts do not exclude that after June 1, tensions will increase in the fuel market of Ukraine. “Operators will look for opportunities to accumulate reserves and, on the other hand, hold resources in anticipation of a speculative rush in prices,” Sapegin notes.
It is worth saying that if not a single permit has been issued for deliveries of products from the Russian government’s resolution since June 1, metallurgists will also feel this. In particular, 55-60% of coking coal is imported from Russia (included in the list).
Even if the worst scenario becomes true, it also has its advantages, experts say. But at the first stage, there would be a very strong crisis that would affect almost all sectors of the economy, sensitive to price jumps in the fuel market.
Oddly enough, oligarch Ihor Kolomoysky, who has long sought to restrict the supply of auto fuel to Ukraine, will be the biggest winner if Russia implements an apocalyptic scenario. In recent years, gasoline, diesel, and LPG production in the Kremenchug refinery under his control have decreased, in particular, due to competition with Russian LPG and diesel. Domestic manufacturers of autogas, which have long sought to introduce import quotas, will also benefit.