Brazil cuts reliance on Russian diesel amid new US oil sanctions

Hello and welcome to Energy Source, coming to you from New York and São Paulo, where government officials, executives and climate experts have been passing through on their way to COP30.

This year’s climate talks in Belém, Brazil, are taking place amid a contentious debate over how to tackle the climate crisis as the US and many companies backtrack on pledges to limit carbon emissions.

The US is withdrawing from the Paris Agreement — and no high-level American officials are attending the talks, leaving other global powers such as China and the EU to shape the negotiations.

But that did not stop Darren Woods, ExxonMobil’s chief executive, from attending an event in São Paulo ahead of COP30 where he blamed government policies and weak demand for the oil major’s decision “to pace” low-carbon spending.

This sounds like corporate speak for pulling back investment, which would be significant because Exxon leapfrogged European rivals last year when it announced a $30bn investment in clean energy projects over five years.

We should find out next month the extent of any cuts to spending on hydrogen, lithium, biofuels and other low-carbon projects when the company is due to release its future capital expenditure plans.

My colleague Malcolm Moore has been on a trip to the Middle East where he spoke to Saudi Aramco chief executive Amin Nasser about how the world’s largest oil producer is shifting its focus to natural gas. It’s part of the company’s efforts to build the energy backbone required to power artificial intelligence data centres, new industrial hubs and fast-growing cities.

Our main item today is from Brazil, where fuel importers are assessing how to wean themselves off imports of cheap Russian diesel following new US sanctions imposed on Lukoil and Rosneft.

Thanks for reading, Jamie

Brazil cuts reliance on Russian diesel

Brazil gorged itself on cheap Russian diesel in the wake of punitive western measures against Moscow’s oil products over its full-scale invasion of Ukraine.

The South American nation’s imports of the fuel from Russia rocketed from $95mn in 2022 to $5.4bn last year, saving it close to a billion dollars, according to some estimates.

As US President Donald Trump seeks to squeeze funding for Russia’s war machine, some in Brazil have recently worried Washington might target Latin America’s largest economy because of the purchases.

But against a backdrop of shifting market and geopolitical forces, the trade is showing signs of unwinding. New American sanctions announced last month on Russia’s two biggest oil companies, Rosneft and Lukoil, look set to accelerate the trend, say market watchers.

Jeremy Paner, a former US sanctions official and a partner at law firm Hughes Hubbard & Reed, said the latest restrictions are tighter than previous rounds. “If I am a Brazilian company, I’ll have to think long and hard about importing Russian diesel because Trump could use that to basically punish Brazil,” he added.

Despite being a top-10 global crude producer, a lack of refining capacity leaves Brazil reliant on inbound shipments for about one-third of its diesel consumption.

So when Russian sellers began offering discounts for crude and petroleum derivatives because of sanctions and price caps by the US, EU, G7 and allied nations, Brazilian fuel importers seized the opportunity.

In 2023, Russia overtook the US to become the country’s top foreign diesel supplier. Only Turkey bought more of the fuel from Moscow in the first nine months of this year, according to the Centre for Research on Energy and Clean Air. 

In total, Brazil has paid $13.6bn for diesel from Russia since the start of 2023, official trade data shows. Under the earlier sanctions, these purchases were permitted, provided buyers comply with a detailed set of regulations on issues such as shipping.

Brasília typically opposes economic sanctions unless passed by the UN Security Council. It has a strategic relationship with Moscow, a partner in the Brics group. Russia is also a major supplier of fertilisers to the South American country’s agricultural sector.

The discount on Russian diesel delivered to Brazil versus US Gulf Coast product hit a peak of 16 per cent in August 2023, according to Wood Mackenzie. It calculates the lower prices provided Brazil annual savings of about $500mn in 2023 and $400mn last year. However, the price gap has now “virtually disappeared”, according to the consultancy.

“Imports of Russian diesel have already been losing momentum in recent months, giving way mainly to imports from the US and India, as well as some cargoes from Saudi Arabia and Oman,” said Rodrigo Jacob, analyst at Wood Mackenzie. “New sanctions raised the operational costs of shadow fleets and insurance, especially for long-distance shipments.”

Having represented 60 per cent of all Brazilian diesel imports in the first half of 2025, Russia’s market share dropped to 17 per cent in October, official trade data shows.

Sergio Araujo, the executive president of Abicom, Brazil’s fuel importers’ association, said: “[This is] due to very high domestic demand in Russia, which has reduced availability, and also because some Russian refineries have been out of operation due to drone attacks and maintenance.”

Russian oil product exports to Brazil come from Baltic Sea ports, where Rosneft and Lukoil refineries account for about 40 per cent of volumes supplied, according to Wood Mackenzie, so the new sanctions are likely to further stymie diesel shipments.

The development comes as Brasília tries to mend relations with the US, following a diplomatic crisis sparked earlier this year by Trump’s 50 per cent trade tariff on Brazil. Shortly after that, Washington imposed an additional 25 per cent levy on India for buying Russian oil, leading to fears Brazil could be further punished.

However, a rapprochement is on the cards following a meeting between Trump and his Brazilian counterpart, Luiz Inácio Lula da Silva. Brazil could try to demonstrate goodwill in bilateral trade talks by highlighting its increasing preference for American diesel.

That still leaves the issue of filling the supply gap. The FT contacted 10 of the top Brazilian importers of Russian diesel following the Rosneft and Lukoil sanctions, but most didn’t reply or answer questions.

Those that declined to comment included gas station network Vibra, commodities trader Nimofast and a subsidiary of Raízen, a joint venture between Shell and Brazilian conglomerate Cosan.

Fuel distributor Saara Combustíveis said there could be a reduction in Russian imports “as a consequence of legal and regulatory uncertainties”. Oil Trading, an importer that belongs to gas station network Ipiranga, said it didn’t engage in transactions that violated sanctions, but it saw “no risk of product shortages”.

Even if it could mean more expensive fuel, industry figures here insist the pumps won’t run dry. (Michael Pooler and Beatriz Langella)

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Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Tom Wilson, Rachel Millard and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.