Rosneft chief Igor Sechin proposes curbing traders and loosening fuel rules to ease Russia’s fuel crisis

Rosneft chief Igor Sechin wrote to Vladimir Putin proposing measures to stabilize Russia’s fuel market, citing “an unprecedented amount of damage” to Russian refineries, the Russian business daily Kommersant reports.

Sechin sent the letter in late May. In it, he notes that producers of Euro-5 standard gasoline and diesel are currently required to sell 15% and 16% of their output on the exchange, respectively. He proposes suspending those requirements until refinery capacity has been fully restored, and calls for the following measures:

• Require producers of Euro-3 fuel — described as having “temporarily permitted reduced quality characteristics” — to sell their entire output on the exchange.
• Ensure priority exchange access for end buyers of gasoline and diesel rather than resellers who “maximize their revenues.”
• Require all oil companies to send at least 30% of their extracted crude for domestic refining.
• Change how exchange sales are calculated for vertically integrated oil companies, accounting for the needs of their gas station networks as well as deliveries under government contracts and to essential services enterprises.

Putin reviewed Sechin’s letter and instructed Deputy Prime Minister Alexander Novak to “review it and report back,” Kommersant reports.

Industry sources who spoke to the publication singled out Sechin’s proposal on priority access for end buyers as particularly notable. In their view, it is “a logical initiative,” but one that could prove difficult to implement.

The sticking point, Kommersant’s sources said, is that many independent gas station networks buy fuel on the exchange through traders rather than directly — making it unclear how to determine end-buyer status in such cases.

Ukrainian forces have been regularly striking Russia’s oil industry infrastructure. Drone attacks, Reuters reported in late May, forced nearly all major refineries in central Russia to suspend or scale back production. Dozens of Russian regions have introduced limits on the sale of gasoline and diesel fuel.

Amid the fuel shortage, the government has allowed some refineries to supply the domestic market with gasoline and diesel that do not meet Euro 5 standards for sulfur content and other indicators. This lower-grade fuel, equivalent to Euro 3, is intended strictly for domestic use.

In the second half of May, reports said independent gas stations — which account for about 40 percent of fuel sales in Russia — were unable to replenish supplies on the exchange. Representatives of these networks said vertically integrated companies (including Rosneft) had largely stopped selling petroleum products on the exchange, instead redirecting them to their own retail stations.