Brazil faces hurdles replacing Russian diesel supply

On Tuesday (15), NATO Secretary-General Mark Rutte warned that countries such as Brazil, China, and India could be affected by secondary sanctions threatened by U.S. President Donald Trump. The proposed measure would impose 100% tariffs on nations buying from Russia, unless Russian President Vladimir Putin agrees to a peace deal in Ukraine within 50 days.

From January to June, Russia was Brazil’s top diesel supplier, accounting for $2.5 billion in exports, according to data from Brazil’s Ministry of Development, Industry, and Foreign Trade (MDIC). The United States ranked second, with $1 billion. Currently, domestic production meets 70% of Brazil’s diesel demand, with the remaining 30% filled through imports.

According to Felipe Perez, an analyst at S&P, Brazil would face difficulties sourcing diesel elsewhere amid already tight global inventories. “If tariffs are extended to fuels, U.S. diesel will become less competitive for Brazil. India could be an option, but it is also a major importer of Russian diesel and could be subject to the same sanctions,” he said. Mr. Perez said Nigeria and Middle Eastern countries remain potential suppliers, though high freight costs and limited volumes could make them less viable.

Russia emerged as a key player in Brazil’s diesel imports in 2023, after Western sanctions over the war in Ukraine shut the country out of its traditional markets. To attract new buyers, Russia offered discounted fuel, prompting increased purchases by Brazil, India, and China.

That same year, Moscow temporarily halted diesel and gasoline exports to contain domestic price spikes, as crude oil prices neared $100 per barrel. The short-lived export ban heightened global concerns over the reliability of Russian supply, which is rarely governed by long-term contracts.

According to MDIC, Brazil set a record in 2023 by importing $4.5 billion in diesel from Russia. That trend has continued into 2024, with Russian diesel purchases totaling $5.4 billion—well ahead of the $1.4 billion in imports from the U.S. For comparison, in 2022, Russian diesel accounted for just $95 million in Brazilian imports, ranking Russia eighth among suppliers. That year, the U.S. led the list, with $8 billion in sales.

Sergio Araujo, president of the Brazilian Association of Fuel Importers (ABICOM), said Brazil will likely face a challenge in finding an alternative supplier that can meet its needs. The situation would worsen, he said, if sanctions also affect China and India, creating global demand that outpaces supply. “That scenario would shake up the market. The U.S. could be an alternative, but I’m not sure U.S. refineries have the capacity to scale up production enough,” said Mr. Araujo. “If global supply falls short, prices will surge, adding pressure to inflation.”

ABICOM members importing Russian diesel are waiting to see if Mr. Trump’s threats materialize. According to an industry source, most Russian diesel buyers in Brazil are independent operators.

Asked for comment, Acelen, the owner of the Mataripe refinery in Bahia, said it does not purchase Russian diesel. Raízen declined to comment, while Vibra did not reply to Valor’s request for comment.

Petrobras also said it does not buy crude oil or refined products from Russia. In a statement, the state-run company said diesel imports are driven by market conditions. “Petrobras’s global operations, through its international trading subsidiaries, allow it to import from a range of suppliers, primarily from the U.S., India, and the Persian Gulf region.”