Russia, one of the world's largest oil exporters, is suddenly facing fuel shortages at home.
The shortage has sparked tensions between the Kremlin and Russia's Oil companies, including the firing of some senior executives at state oil company Rosneft Oil. The company is run by chief Executive Igor Sechin, a close ally of President Vladimir Putin.
Tensions rose this month when soaring fuel prices, particularly in the southern agricultural heartland, prompted Moscow to ban diesel and petrol exports. After the ban was implemented, domestic oil prices plunged, giving Russian companies breathing space. Diesel prices rose in other parts of the world, potentially adding to the surge in energy prices.
Unlike in 2022, when Moscow cut gas exports causing difficulties for Europe, the export ban is aimed at limiting the economic and political impact of high domestic prices in Russia.
This internal Russian conflict is an unexpected twist in the context of the war in Ukraine.
The supply shock is a sign of the growing economic costs to Russia of waging war, though analysts said it was not serious enough to deter the military.
The government and Rosneft are at odds over how to balance profits with stability in the domestic energy market. Oil companies are Russia's most important industry.
The energy companies have recently been receiving billions of dollars in payments to encourage them to sell more fuel at home. The Russian government appears to have stepped up pressure on these companies to prioritize securing domestic supplies without monetary incentives, in part to help fight inflation.
The inner workings of Russian energy politics are notoriously opaque. While some of the debate has been made public, others have been played out in private.
Rosneft recently fired the head of its trading division, Marat Zagidullin, according to a person familiar with the matter. Mr. Zagidullin was escorted out of the office by security, one of the people said.
Also leaving Rosneft were Nikita Pakulin and Andrey Dobryakov, the heads of the company's chemical sales division, and Alexander Polyakov, a senior executive at the company's finance division. Zagidullin, Pakulin, Dobryakov and Polyakov could not be reached for comment.
The departures were prompted by Rosneft's need for someone to take responsibility for domestic fuel shortages, in part to end the blame game in the Russian government, the people said. While Rosneft's top executives change frequently, the latest shake-up is unusual, some of these people said.
A spokesman for Rosneft said the information contained in the Journal's questions' does not correspond to the facts. ' The company's personnel changes are simply designed to improve efficiency and benefit shareholders. Some cases may be personal decisions made by employees who have completed their obligations to the company in their employment relationship."
Mr. Putin's government has moved to curb those payments in the face of a host of headwinds, including soaring inflation, a weak ruble and labor shortages.
These payments, known as "dampers," partially compensate companies such as Rosneft for selling oil products on the Russian domestic market. In Russia's domestic market, the government puts pressure on suppliers to control retail prices, so selling petroleum products domestically tends to be much less profitable than exporting them. Companies such as Rosneft, Gazprom Neft and Lukoil operate large refining and crude drilling operations.
After Russia invaded Ukraine, the Russian government made huge compensation payments due to soaring international energy prices and the devaluation of the ruble. That has pushed up Rosneft's profits, which by one measure rose nearly 10 percent in 2022, but at the cost of draining public finances and driving the budget deficit.
"All of a sudden they're having to pay refiners billions of dollars a month to compensate them for the losses they've suffered by effectively cross-subsidizing the domestic market with the international market," said Ronald Smith, senior oil and gas analyst at BCS Global Markets. "It became untenable," Smith said.
Before the pandemic, the government was paying oil companies just $400m a month, according to analysts at Citigroup. During the lockdown, the companies effectively paid money to the government. After Russia invaded Ukraine, the government paid as much as $2.7 billion a month, equivalent to one-fifth of the Energy Ministry's budget.
The Russian government set out to halve that payment from this month. The oil companies fought back. Analysts say oil companies are exporting more oil and refined products overseas, while keeping some refineries offline for longer than normal to avoid selling products at home.
According to analysts, some independent traders buy fuel on Russia's wholesale market and then export it at higher prices, further weakening supply. Supply cuts by Russia and Saudi Arabia have raised global diesel prices, making such deals attractive.
"These companies think they are not getting a high enough price on the domestic market, which is why they prefer to export crude oil and any diesel they can export," said Mikhail Krutikhin, an independent energy analyst. "The result is a certain shortage," Krutikhin said. It started in Crimea and then spread to southern Russia."
The Russian government intervened last week, announcing a ban on most diesel and gasoline exports, but did not say when the restrictions would end.
If the ban is permanent, it will have a major impact on global fuel supplies. According to UBS Group, Russia's diesel supply accounts for about 15% of the international seaborne diesel market. Russian gasoline exports account for a smaller share of the global market than diesel.
Analysts at Capital Economics said the Russian ban would boost crude prices as refiners in other parts of the world would have to ramp up production to make up for the loss of Russian fuel exports.
Russian government officials have blamed the shortage on so-called grey diesel exports, in which diesel is bought inside Russia and sold abroad.
"Unscrupulous players buy goods in the domestic market and export them for profit, because there is a huge difference between domestic prices and export prices," Deputy Energy Minister Pavel Sorokin told the State Duma last week, according to Interfax. He did not specify who those participants were.
The immediate beneficiary of the export ban is Russian agriculture. Andrey Sizov, managing director of SovEcon, said higher fuel prices have eaten into the profit margins of farmers who have just started planting winter crops, but that has not affected harvest levels.
The debate over fuel shortages has become somewhat public. The government's ban came a day after Alexander Dyukov, chief executive of state-owned Gazprom, told reporters that any restrictions aimed at stabilizing the domestic market could backfire, according to the TASS news agency.
The ouster of Zagidullin, head of Rosneft's trading division, came as a surprise as the company managed to find new foreign buyers and avoid sanctions.
One of the main aims of Western sanctions is to limit Russia's oil export revenues, the largest source of Treasury revenue. Russia has thwarted these efforts, finding new buyers, traders, shipowners and insurers. The price of Russia's oil exports has exceeded the ceiling set by the United States, boosting Russian Treasury revenues.
Rosneft struck a number of deals this summer, selling large amounts of its energy output through an auction to a group of previously little-known traders. Building on that success, Rosneft had intended to hold a new auction for oil shipments next year, people familiar with the matter said.
But at the same time, new problems were brewing in Russia. Russia's domestic fuel supply is rife with political maneuvering, especially in the run-up to elections, such as the presidential one planned for early next year.
Sergey Vakulenko, a non-resident scholar at the Carnegie Russia Eurasia Center, said: "It is not a question of price at all, but of the actual supply of fuel." He added, "The Russian government exacerbates the problem by trying to control prices and forcing oil companies to sell their products below market value."