In February 2023, the European Union and its G7 partners extended their sanctions on Russian oil from crude to refined products. The EU embargo on seaborne Russian products took effect, and the coalition set two price caps: USD 100 a barrel for products that trade at a premium to crude, such as diesel, and USD 45 a barrel for products that trade at a discount, such as fuel oil and naphtha. Western shippers, insurers and financiers could only handle Russian products sold at or below those prices.
Diesel was the commodity that mattered most. Before the invasion of Ukraine, Europe was the natural market for Russian diesel, which travelled short distances from Baltic and Black Sea ports into a region that has long been short of middle distillates. A year of data now shows what happened when that market closed.
Volumes up, partners changed
According to the US Energy Information Administration, Russia's seaborne diesel exports did not fall in 2023. They rose 8 per cent, from 0.9 million barrels a day in 2022 to 1.0 million barrels a day, and diesel accounted for 40 per cent of Russia's seaborne petroleum product exports.
What changed was the destination. Europe excluding Türkiye took 67 per cent of Russia's seaborne diesel exports in 2022, around 626,000 barrels a day. In 2023, its share fell to 5 per cent, or 53,000 barrels a day. Türkiye, which is not an EU member, became the dominant buyer, its share rising from 13 per cent (122,000 barrels a day) to 31 per cent (315,000 barrels a day).
Two new large buyers emerged. Brazil received 13 per cent of Russia's seaborne diesel exports in 2023, around 136,000 barrels a day, and Saudi Arabia took 6 per cent, about 61,000 barrels a day. Both had taken less than 1 per cent in 2022. Four African countries, Libya, Tunisia, Morocco and Ghana, each increased their seaborne diesel imports from Russia by more than 20,000 barrels a day.
Why these buyers
The new map has a commercial logic. Brazil is a large diesel importer with a big agricultural and freight sector and limited refining capacity relative to demand. When discounted Russian cargoes became available, Brazilian importers had every reason to take them, and suppliers elsewhere in the Atlantic Basin faced a new competitor in one of their larger markets.
Saudi Arabia's purchases point to a different pattern. A major refiner and product exporter importing Russian diesel suggests arbitrage: buying discounted Russian product for domestic use or storage while exporting domestic output at market prices to buyers that prefer non-Russian origin. The EIA data do not show the motive, but the combination of large imports and large exports is consistent with that kind of trade.
Türkiye's role is the most important. As a large refining and trading hub close to Europe, Türkiye can import Russian diesel for domestic use and export its own refinery output, including to the EU. That makes it a buffer between Russian supply and European demand, whether or not any Russian molecules physically reach the EU.
The cost of rerouting
Diesel that once made a short voyage from Russia's Baltic ports to northwest Europe now goes to Santos, Jeddah or African ports. Longer voyages tie up more tankers and raise freight costs. They also change who controls the shipping. The EIA cites data from the Centre for Research on Energy and Clean Air showing that the share of Russia's oil product shipments owned or insured by EU or G7 countries fell from about 80 per cent in 2022 to 58 per cent in 2023, because of the shipping prohibition.
That shift is the reason the price cap is hard to enforce. When cargoes move on vessels owned and insured outside the coalition, Western regulators lose their main lever. In February 2024, the coalition published a compliance and enforcement alert describing common evasion techniques, including falsified documents, irregular shipping routes and the use of the shadow or grey fleet, meaning anonymously owned or insured vessels used to trade sanctioned oil. The alert, which the US Treasury's Office of Foreign Assets Control published on 1 February 2024, is an admission that the cap has leaked.
Revenue: the real test
The aim of the price cap was never to stop Russian oil reaching the market. It was to keep it flowing while reducing Moscow's earnings. On that measure, the EIA reports that Russia's export revenue for oil products and other chemicals fell 14 per cent, from USD 104 billion to USD 89 billion.
Part of that decline reflects lower global product prices in 2023 compared with 2022's peak, so it would be wrong to credit all of it to sanctions. But the combination of discounts to new buyers, higher freight and less favourable logistics has clearly reduced the value Russia captures on each barrel.
A domestic squeeze
The pressure on Russian refining in early 2024 has added another layer. The EIA reports that sustained price caps, rising export demand from countries outside the sanctions and refinery outages have reduced the supply of diesel and gasoline to Russia's domestic market, raising domestic fuel prices and prompting periodic export bans. Monthly refinery runs started falling in January 2024 because of outages linked to reported drone strikes and sanctions, and an estimated 14 per cent of Russia's refining capacity was offline in the first quarter of 2024, before the usual spring maintenance season.
If outages persist, Russia faces a trade-off between supplying its domestic market and maintaining product exports. More crude exports and fewer product exports would be one outcome, which would hand more refining margin to buyers such as India and Türkiye.
What it means for diesel markets
For global diesel markets, the main effect of sanctions has been longer supply chains rather than lost supply. Europe has to source its diesel from suppliers further afield, while Russia now supplies Türkiye, Latin America, North and West Africa and the Gulf. Total volumes are similar, but more tanker capacity is needed to move them, which tightens freight markets and makes diesel prices more sensitive to disruption on any single route.
That sensitivity matters more in 2024, with Red Sea attacks forcing some tankers on longer voyages and Russian refining under pressure. A system that has been stretched by sanctions has less slack to absorb further shocks.
The policy lesson
The product price cap has achieved part of what it promised. Russian diesel has kept flowing, avoiding a global shortage, and Russian product revenue has fallen. But the shift of trade to non-coalition shipping and the growth of new buyers mean that enforcement becomes harder over time, not easier. If the coalition wants the cap to bite further, it will need to focus less on the headline price and more on the vessels, insurers and intermediaries that now carry the trade.