Russia Surpasses US in Desel Exports to Brazil

Monday, June 19, 2023

Ahmed Adel, Cairo-based geopolitics and political economy researcher

Brazil has firmly maintained its position as Russia’s number-one trading partner in Latin America since 2010, and over the years, bilateral trade indicators have continued to rise progressively. More recently, Russia became the leading exporter of diesel to Brazil, surpassing the US, according to Ancelmo Gois’s column in O Globo.

In Brazil, 22% of diesel must be imported, and half comes from Russia because the price is 15% to 20% cheaper than fuel from the US. Brazil, along with Turkey, Saudi Arabia, and the United Arab Emirates, were responsible for 65% of Russian diesel imports in May alone despite having imported close to zero at the start of the year.

This was evident in the St. Petersburg International Economic Forum (SPIEF) meetings. During the open session between Brasilia and Moscow, the parties exchanged views on closer cooperation between the countries, which, under the conditions of collective sanctions by Western countries, only expanded opportunities for exchanging goods.

Representatives of Brazilian companies in Russia noted that they were ready to develop commercial activities and meet all requirements of the Russian market. They also expect assistance from Russia in bureaucratic matters so that economic exchanges can work at total capacity.

In 2022, trading volume reached record levels, which increased by 31% from 2021, reaching $9.8 billion. This was possible thanks to the combined desire of business and political circles to develop and support common Russian-Brazilian interests.

There are, however, some difficulties that could affect turnover in 2023. The two main reasons are mutual calculation and logistical difficulties. During the meeting, the parties agreed to find methods to create an effective system for the work and development of the business sector of both countries.

The head of the Trade, Investments and Agribusiness sections at the Embassy of Brazil in Moscow, Hugo Lins Gomes Ferreira, said that Brazil-Russia trade could break the 2022 record. Ferreira also stated that Russian companies, particularly in the fertiliser industry, are increasingly interested in investing in Brazil.

Brasilia’s current rapprochement with Russia is an example for other Latin American countries and turns the country into a “gateway” for Moscow in the region. The fact that Brazil can achieve a better position with Russia can be taken as an example. It also opens a huge window of opportunity for other countries to express interest in negotiating with Moscow, especially as Venezuela historically was the only other South American country with close ties to Russia. Unlike Brazil, though, Venezuela is not a regional power.

As Latin America’s biggest power, Brazil is again behaving as a regional leader and is using the BRICS channel to maintain and increase the economic flow between member states. One topic that both Russia and Brazil are working on is the possibility of transacting business in currencies other than the US dollar. 

In April, Brazilian president Luiz Inácio Lula da Silva called on non-Western countries to work towards replacing the US dollar with their own currencies in international trade.

“Every night I ask myself why all countries have to base their trade on the dollar,” Lula said in an impassioned speech at the New Development Bank in Shanghai, also known as the BRICS bank. “Why can’t we do trade based on our own currencies?” he added, drawing loud applause from the audience of Brazilian and Chinese dignitaries. “Who was it that decided that the dollar was the currency after the disappearance of the gold standard?”

Any effort by Brazil to snub the US currency in the near term will face a substantial challenge and could lead to deteriorating relations with Washington. Although the dollar is losing its power and at an accelerated pace since Western sanctions were imposed following the Russian military operation in Ukraine, it remains vital to global commodities markets and will be in the near future.

Considering Brazil has refused to align with the West’s policy on Russia, promotes de-Dollarisation, and has now replaced the US with Russia as its main diesel supplier, it can be expected that Washington will begin ramping up pressure on Brazil. In addition, although Lula continually reiterates his country’s neutrality to be able to broker potential peace talks between Russia and Ukraine, he irritated Western countries earlier this year by highlighting that they had been “encouraging” war by arming Ukraine.

The backlash Brazil has received from the US for its position on Ukraine and Russia has been minimal, especially compared to India. However, this situation is unlikely to change, especially if the Latin American country continues an energy policy favouring Russia and promotes de-Dollarisation.

Source: InfoBrics