Russian authorities have allowed their large producers to resume seaborne exports of diesel in an apparent bid to avoid any negative impact on oil production, as the country’s market is unable to absorb the additional influx of this fuel.
Export shipments can resume provided the diesel is delivered to the Russian ports via a pipeline network operated by state-run Transneft, according to a statement on the government’s Telegram account.
The ban on all exports of petrol and diesel fuels was announced on 21 September, however, it was partially relaxed earlier this month.
The decision came a day after the Russian government had cheered the higher revenues it received from the country’s oil and gas producers in September this year, with the Finance Ministry issuing a positive outlook on the potential growth of such income during the fourth quarter.
The ministry also reported another jump in the estimated average price of Russian commonly traded oil export blend Urals, saying that its cargoes had been sold last month for an average of just over $83 per barrel against $74 per barrel in August.
Urals has been traded well above the price cap of $60 per barrel that was introduced by Group Seven countries and their allies in December last year in an effort to limit revenues that the Kremlin could use to finance its ongoing military aggression in Ukraine.
The positive revenue outlook has already been reflected in governmental proposals to parliament to rubber-stamp estimated military spending of 10.8 trillion roubles ($108 billion) next year against 6.8 trillion roubles in 2023, or one-third of the total budget revenues that are planned for next year.
Additionally, about 3.5 trillion roubles have been earmarked to finance various law enforcement agencies inside Russia.
However, even with the expected recovery of its oil and gas revenues, the government has also proposed to cut social and medical spending to fulfil its military obligations.
Moscow news outlet Finanz suggested the proposed military spending will become the highest since the break-up of the Soviet Union in 1991.
According to the Finance Ministry, gross budget revenues from collecting direct oil and gas taxes — the production tax and the export tax — increased to almost 1.2 trillion roubles in September — the highest monthly income for the year — compared with 954 billion roubles in August.
However, the ministry also said the government last month had to pay back about 453 billion roubles to large oil producers, compared with 314 billion roubles in August, to compensate them for the supply of discounted oil products to the domestic market from refineries that they own and operate.
In September, the Kremlin ordered a complete halt exports of petrol and diesel fuels outside the country to artificially flood the domestic market with these fuels, and thus achieve the drop in their market price to bring them closer to governmental targets.
The ban was partially lifted earlier in October to avoid a possible decline in oil production in the country because of the overstocking of diesel — about half of which is usually shipped outside Russia as there is no market for it inside the country.
The government permitted large producers to resume exports of unfinished oil products that are bought by refiners in India and elsewhere as oil replacement feedstocks for further processing into retail petrol and diesel fuels.
The Finance Ministry now forecasts that, following the improved international oil price, it will be able to raise a total of 8.86 trillion roubles of budget payments from the oil and gas sector this year.
The planned target of oil and gas tax collections for 2023 was set at 8 trillion roubles and was seen as unachievable during the first half of this year.
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