The introduction of duties on import of diesel fuel and liquefied gas of Russian production will cause price increases, weaken competition in the market and will not solve the problems of Ukrainian oil refineries, according to A-95 Consulting Group.
According to a press release, the group came to such conclusions following a study of complaints by Ukrainian fuel producers represented by PJSC Ukrtatnafta, PJSC Ukrnafta and JSC Ukrgazvydobuvannia to the Interdepartmental Commission on International Trade, in which they asked for an anti-subsidiary investigation and introduce duties on Russian diesel fuel and liquefied natural gas in the amount of 8.46% with an increase to 25.4% over five years.
“The main argument of manufacturers is dumping by Russian exporters, which is not true. Imported petroleum products, including Russian ones, are sold to Ukraine with premiums to the world quotes. So, for 2020 Ukrainian companies signed contracts for Russian diesel fuel with a premium to European quotes of up to $35/tonne, for liquefied gas of up to $22/tonne. This is due to the fact that Ukraine remains import dependent: in 2019, imports of diesel fuel accounted for 88% in the national balance, liquefied gas for 78.5%,” A-95 said.
According to the group, the most critical consequences of duties will be felt by the diesel market, which accounts for 70% in the basket of motor fuels. If the proposed duty is introduced at 8.46%, imports from Russia may cease completely, which will increase pressure on the remaining sources of supply, primarily Belarus, whose share will grow from the current 35% to 60% of the market. At the same time, the capabilities of Ukrainian producers are limited by a twofold increase in processing, which in the best case will allow raising the market weight from 12% to 25%.