The recent agreement between the United States and Russia for the import of 1.8 million tons of diesel to the USA is a sign of changes in the global energy market. This agreement is particularly significant as fuel supply worldwide has been affected by wars and sanctions.
Details of the Diesel Agreement
According to this agreement, Russia will immediately send 300,000 tons (equivalent to 2.24 million barrels) of diesel to the markets of the USA and globally. In November, another 500,000 tons will be added, and later, an additional one million tons will be included. Furthermore, if refinery conditions are met, an additional 3 million tons will also be delivered to the USA in the near future.
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The supply of diesel from Russia comes at a time when the war between the United States and Israel against Iran has severely impacted fuel supply in the Middle East. Before the onset of this war, the Middle East accounted for nearly 20 percent of total global diesel exports.
Economic and Political Consequences
Overall, the amount of diesel supplied in the first phase of the agreement is only sufficient to cover the daily consumption of the USA for just over 3 days and for the world for about half a day. If the second phase of the agreement is also implemented, this duration will increase to 9 days in the USA and just over one day globally.
This agreement is particularly important economically for Russia. Estimates suggest that the value of this agreement in the first phase will contribute approximately $2.8 billion to the Russian treasury. If the second phase is implemented, this amount will increase to over $7 billion. This revenue could help finance Russia's war in Ukraine.
Volodymyr Zelensky, the President of Ukraine, has interpreted this agreement as a "gift" for Putin and has warned that this action will increase Russia's financial capacity to purchase new military equipment.
Following this agreement, the Russian government has taken specific measures to secure its diesel needs. For example, on July 8, Russia temporarily announced a ban on its diesel exports due to the loss of refinery capacity. The country has also begun importing fuel from India and South Korea to compensate for its domestic shortages.
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