Can Russian diesel rescue the US market from its repercussions?
Afrasianet - Hamza Hossam - To what extent has the double supply shock in the diesel market turned into a negotiating card in Moscow's hands? Can a limited energy settlement in Ukraine address a shortage that has its roots in the Hormuz crisis?
A diesel tanker is running late, and the impact is reaching wheat fields, container ports and gas stations in geographies far apart. The impact has reached an extraordinary level in the United States, where the average price of a gallon of diesel was $6,179 on Oct. 12, $2,514 more than a year ago, according to the U.S. Energy Information Administration.
At the heart of this scenario are three factors: a Gulf whose exports of refined products have declined due to the Hormuz crisis, Russian refineries hit by Ukrainian drones, and Washington, which is looking for an urgent way out for its consumers ahead of next month's midterm elections. This intersection raises a central question: To what extent has the dual supply shock in the diesel market turned into a negotiating card for Moscow?
In principle, it can be assumed that Russian diesel will partially alleviate the crisis, but the Gulf deficit resulting from the closure of the Strait of Hormuz—either in whole or in part—is greater than Russia can compensate, and even if Russian diesel supplies fully recover, they will at best cover only one-third of the total gap caused by the Hormuz crisis.
Shock Weight
The analogy of diesel is a hidden artery in the body of the global economy, through which grain passes to ports, goods to markets, and equipment to production sites. When this artery narrows, the cost of every commodity that depends on it for transportation or production rises, and the crisis extends from the energy sector to product prices and inflation rates.
Russia was the world's second-largest exporter of diesel after the United States, before it began restricting its overseas sales last summer as the Gulf's net exports of the fuel fell to an average of 390,000 barrels per day (bpd) in August, just over a quarter of its pre-February 2026 level before the declaration of aggression against Iran in February 2026, according to the International Energy Agency. Combined net exports to the Gulf and Russia in the same month were 1.6 million bpd lower than February's level. These figures may explain the speed with which the disruption has moved from ports to people-sourced gas stations.
Restricting movement in the Strait of Hormuz. The root of the crisis
The bulk of the cumulative shortfall in diesel exports is due to the disruption of Gulf supplies due to traffic disruptions in the Strait of Hormuz and its frequent closures. The Kyiv Institute of Economics (KSE) estimated Gulf-linked losses at 152 million barrels between March and August 2026, equivalent to about 224 percent of Russia's 68 million barrels, more than double that. This corresponds to about 25 million barrels per month in the Gulf case and about 11 million barrels per month in the Russian case. The total loss is 220 million barrels, of which Russia accounts for about 31 percent, so a full recovery of Russian supplies, at best, would only address one-third of the gap.
Moreover, the figures reveal the extent of the bottleneck in the diesel market, with the Gulf's net exports of this fuel averaging 390,000 bpd in August, equivalent to or slightly above its pre-war level. Total exports from the Gulf and Russia were down 1.6 million bpd from February, according to the International Energy Agency, while Gulf losses were estimated at 152 million bpd between March and August, more than double Russia's 68 million bpd.
In its October report, the International Energy Agency predicted that diesel shortages will continue until 2027, contingent on the recovery of supplies of refined products from the Middle East, or in other words, a solution to the crisis of transit through the Strait of Hormuz, which remains stalled as long as the memorandum of understanding signed between Tehran and Washington on June 17, 2026, is not implemented.
Russian ban
Washington touts the idea of Moscow as an alternative reservoir that can make up for the Gulf shortfall, but Russia's decisions on the diesel market illustrate the picture more accurately.
In this regard, we should go back to late September 2025, when the Russian government approved a temporary ban on diesel exports, initially included non-productive independent traders and refineries with an annual capacity of less than one million tonnes, to be extended in early July 2026 to all fuel producers without exception, initially ending on October 31, before extending it in phases until October 31. Following the Putin-Trump agreement, Moscow partially lifted the ban on diesel exports on October 10, allowing the export of 500,000 tons at this stage.
Prior to the July decision, Russian diesel exports in June fell to less than 1 million tonnes, according to estimates quoted by Reuters, after reaching about 2.5 million tons per month in the same period in 2025. Data from Reuters and LSEG (London Stock Exchange Group) show that seaborne diesel exports fell 39% in the same month from May to about 1.8 million tonnes, and 46% from 3.35 million tonnes in June 2025.
Part of this decline was attributed to Ukrainian drone strikes on Russian refineries. While Ukraine's Ministry of Defense claimed that 51 percent of Russian refining capacity had been disrupted, the International Energy Agency and Russian Sector Resources estimated the damage from these strikes at 33 percent to 40 percent as of June, while Russian diesel production fell by about 30 percent. This attrition was reflected in the sector's performance in Russia, with refinery production falling to 3.7 million barrels per day in July, versus a nominal capacity of 6.5 million barrels, or 57 percent of total capacity, to its lowest level in more than 20 years. The decline was due to the fact that three of Russia's six largest diesel refineries stopped or drastically cut production in mid-September, the Kiryşi, Volgograd and Nuri refineries, which together produce about half of Russia's diesel production.
In practice, this situation forces Moscow to rehabilitate its refineries and rebuild its domestic reserves before winter, thus narrowing its ability to make up for the shortfall caused by Gulf losses due to the frequent closures of the Hormuz plant, and making it impossible for the Russian producer to fill the shortages of other large suppliers.
The Putin-Trump Deal: What Expected Impact on the Diesel Market?
On October 9, Trump announced an agreement with Putin to supply Russian diesel to the US and global markets, starting with more than 300,000 tons immediately, rising to 500,000 tons in November, and then 1 million tons in December, with a target of reaching 3 to 3.5 million tons per month by the end of 2026, according to the development of the performance of Russian refineries. Moscow has begun implementation by partially lifting the export ban as of October 10, coinciding with the US Treasury Department's issuance of a license authorizing transactions related to Russian diesel until April 7, 2027.
In terms of numbers, the three batches are equivalent to 2.24, 3.73 and 7.45 million barrels, respectively, according to S&P Platts' conversion factor of 7.45 barrels per metric ton of diesel. Since the gap between the combined net exports of the Gulf and Russia amounted to 1.6 million barrels per day, or about 48 million barrels per month, the three batches (2.24, 3.73, and 7.45 million barrels) roughly cover only 5%, 8%, and 15% of this gap, which are total quantities that already include what Russia currently exports. The target announced by Alexander Novak, the Russian deputy prime minister in charge of energy, of 3 to 3.5 million metric tons per month is equivalent to about 22 to 26 million barrels per month, or 745 to 870 thousand barrels per day, a level that is close to the average of exports in 2025 of about 817 thousand barrels per day.
So, according to previous calculations, the first and second batches fall within the range of existing flows. Kpler data estimated Russia's exports at 584,000 tonnes in September and 722,000 tonnes in October so far. Diesel shipments in the first 10 days of October were down 11% from the September average, according to Bloomberg calculations based on Vortexa data, while exports of seaborne petroleum products totaled 979,000 barrels per day. Energy Intelligence estimates (Energy Intelligence) The surplus available for export after meeting the local market by about 200 thousand barrels per day, or about 0.8 million tons per month, provided that the refineries are safe.
Based on all this, the US benefit is achieved through an indirect mechanism if we rely on the readings of Kepler analysts that Russian diesel will reduce competition for US barrels in markets such as Brazil and Turkey. The proceeds of the first batch of 300,000 tons amount to about $400 million in US wholesale prices.
Diesel as a negotiating paper
Henry Farrell and Abraham Newman introduced the concept of "armed interdependence" in an article published in the journal International Security in 2019, outlining two implications: the effect of surveillance and the effect of the choke point. Under the second effect, a country that occupies a pivotal node in the interconnection network can withhold access to the node or the supplies that pass through it from those who depend on it, turning its position into an instrument of influence and pressure.
This concept applies to Russian diesel under two conditions: first, the decision is in Moscow's hands, as it imposes and eases the embargo, and each of these decisions changes the supply of diesel in the markets. Second, the volume of what can be exported depends on the safety of the refineries, and this safety is conditional on the course of the Russia-Ukraine war.
Therefore, the negotiating value is concentrated in the export authorization itself, not in the volume of payments, because the first and second installments are only equivalent to 5% to 15% of the monthly gap, which is a quantity that has limited impact on the market. The authorization to export Russian diesel will also open a wider door to sanctions relief, which has already begun with the US Treasury Department's licensing of its dealings.
On September 13, Trump called on Zelensky to stop hitting Russian refineries, citing the attacks as one of the reasons for the global diesel shortage, and the file moved from the market to the negotiating circle. In parallel, Putin announced on October 1 that Russia would refrain from supplying diesel to global markets as long as sanctions were in place, and the temporary US Treasury license was until April 7, 2027. Ultimately, the package of US steps towards Moscow is seen as a tool of pressure on Kyiv to make concessions in peace negotiations.
Winter Prospects
In the midst of all these dynamics, three variables overlap in determining the winter prospects: the fate of Russia's partial opening, the trajectory of escalation against Iran, and the age of strategic stockpiles.
The first track is based on a fragile Russian openness, as the announced payments range between 300,000 and 1 million tons, figures that fall within the range of what Russia actually exports, and depend on the safety of the refineries, but the fall of the energy truce four days after it announced that Kyiv would resume striking Russian refineries keeps this prospect weak, and threatens to keep exports below the target of 3 to 3.5 million tons per month, as the dispute between Washington and Kyiv is fueled.
The second track is mainly related to the escalation against Iran and the Strait of Hormuz crisis, as any new escalation after the US midterm elections will bring the crisis back to zero and push prices higher, especially since global stockpiles are already low.
Finally, the third track concerns inventories. On October 2, Trump ruled out a ban on U.S. diesel exports days after considering this option, and the G7 announced the release of up to 100 million barrels of oil and diesel, the first 20 days of which will be devoted intensively to diesel, over a four-month period. This equates to about 0.8 million barrels per day, about half of the combined gap of 1.6 million barrels per day, but the release will expire in early February, putting pressure on the market again if the closure of Hormuz, either in whole or in part, remains in place.
As a result, it can be said that the three tracks intersect in one conclusion: as long as the Hormuz crisis is not resolved by a negotiated track between Tehran and Washington that begins with the implementation of the memorandum of understanding signed last June, the Russian batches of diesel to be pumped into the markets will only partially alleviate the crisis, because the radical remedy for the crisis depends on the recovery of Gulf supplies and the recovery of the markets.
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