From a struck distillation unit to 100-lira diesel: Russian refinery capacity and Türkiye's three-channel bill

The head of the chain: two of three primary distillation units out of service

On the night of 16-17 September Ukrainian drones struck the Slavneft-YANOS refinery 250 kilometres north-east of Moscow. According to United24 Media, the unit hit was the AVT-3 primary distillation unit with a capacity of 17,140 metric tonnes a day, corresponding to about 40% of the capacity of a plant that processes roughly 15 million tonnes of crude oil a year. According to the same source, the AVT-4 unit, with a capacity of 14,300 tonnes a day, had already been under repair since the attack of 28 August. In other words, two of the plant's three primary distillation units are out of service at the same time.

This is not one plant's problem. According to OilPrice's breakdown of 16 September, Kirishi is entirely out of service, Volgograd and NORSI are running at about 25% capacity, and Taneco has been struck. These three plants correspond to roughly half of Russia's diesel output. That three of Russia's six large diesel-producing refineries severely curtailed or entirely halted output in September shows that the capacity loss is no longer an isolated damage item but a systemic supply constraint.

Sources conflict on the scale of the attack, and the conflict is worth noting. Kyiv Post reported that Russian officials claimed 65 drones had been shot down during the attack, while The Moscow Times wrote that the Russian defence ministry announced it had intercepted 641 drones across Russia and Crimea between Wednesday night and Thursday morning. The Ukrainian side's claim that it destroyed 1 An-12, 2 An-26 and 3 helicopters at the Tsentralny military airfield in Rostov-on-Don could not be independently verified. Yaroslavl's governor Mikhail Yevrayev said the fire at the refinery had been fully extinguished by Thursday morning; there is no announced timetable for repairs.

The export ban is not a supply decision but an admission of scarcity

According to Hydrocarbon Processing, the diesel export ban due to expire on 30 September was extended to 31 October at a meeting chaired by Deputy Prime Minister Alexander Novak, who handles Russia's oil file. The official justification is deferred refinery maintenance and pre-winter stock replenishment. But the scope of the decision says more than the justification: while in July the ban covered only traders and small refineries, the extended ban covers all producers. Novak's office did not respond to a request for comment and the government did not formally announce the extension.

An export ban widening from traders to producers means an acceptance of giving up the export margin in order to protect the domestic market. Domestic prices support that reading: at the start of September a tonne of diesel rose to 70,546 roubles on the St Petersburg commodity exchange, on 7 September the pump price reached 88.44 roubles a litre, and the increase since the start of the year has reached 18.4%. In other words, Moscow is prioritising price stability at home rather than export revenue.

The loss on the export side is concrete. Russia's diesel exports fell below 1 million metric tonnes in June; a year earlier they were roughly 2.5 million tonnes a month. According to OilPrice, Türkiye and Brazil lost at least 50% of their previous cargo allocations. Because these two countries are among the largest buyers of Russian diesel, the first-order effect of the constraint is seen directly in Mediterranean and Atlantic product flows. For Türkiye this is a question of substituting a supplier before it is a question of price: the lost tonnage has to be covered from another source, most probably over a greater shipping distance.

Transmission to Türkiye: cargo, exchange rate and tax at once

With the increase that took effect at midnight on 17 September, the litre price of diesel passed 100 lira for the first time in Türkiye's history. The sources diverge on the size of the increase: Cumhuriyet wrote that 4 lira 80 kuruş had been added per litre, while Habertürk gave the rise as 4.62 lira. There are small differences in the prices too. According to Cumhuriyet, diesel cost 100.40 lira on the European side of Istanbul, 101.50 lira in Ankara and 101.80 lira in İzmir; Habertürk reported 100.31, 101.43 and 101.70 lira respectively for the same day. Petrol traded in a band of 80.20-81.60 lira and LPG at 34.39-35.09 lira.

This was the third increase in a row: according to Habertürk, 3.20 lira had been added to petrol on 12 September and about 6.5 lira to diesel on 15 September. What matters most is the composition of the price. Cumhuriyet listed the causes of the increase as swings in global markets, movement in the exchange rate and successive excise rises. The exchange rate leg is measurable: according to BloombergHT data, the dollar/lira rate traded at 48.6723 lira at 09.30 on 17 September, roughly 13.12% above the 43.0312 lira at the start of the year. The lira cost of imported fuel has risen by that much even if the dollar price of the product has not changed at all.

Türkiye is therefore taking the same shock through three separate channels at once. The first channel is physical: the loss of at least half of the Russian cargo allocation means substitute supply and longer shipping. The second channel is monetary: the 13.12% rise in the exchange rate makes the same barrel more expensive. The third channel is fiscal: excise rises are loaded directly on top of the price. Though the three look independent of one another, they are derivatives of the same external shock; the exchange rate pressure is itself fed in part by the growth of the energy bill.

One caveat: none of the sources consulted states which crude oil price level is reflected in this increase. How much of the rise at the pump is product premium, how much exchange rate and how much tax therefore cannot be separated out with publicly available data, and could not be independently verified. The impossibility of that separation allows all three sides in the public debate to defend their own account.

Why the pump price is a fiscal matter

Budget data show why the third channel matters so much. According to figures published by the Ministry of Treasury and Finance on 16 September, the central government budget posted a surplus of 12.9 billion lira in August, with revenue of 1,654.9 billion lira and expenditure of 1,642.1 billion lira; Ekonomist gave the same figure as 12.8 billion lira, the difference stemming from rounding. The primary budget surplus in August was 209.9 billion lira.

The monthly surplus does not change the picture. In the January-August period budget expenditure reached 12,162.7 billion lira and revenue 10,854.7 billion lira, leaving a deficit of 1,308.1 billion lira. The eight-month primary surplus is 680 billion lira. The pace of increase in expenditure exceeds that of revenue: according to Ekonomist, eight-month expenditure rose 36.8% and revenue 36%; personnel spending rose 42.7% to 3,385.39 billion lira and interest payments rose 39.4%, approaching 2 trillion lira.

What follows is a vicious circle specific to Türkiye. In a budget where interest payments have risen 39.4%, the fastest instrument for protecting the primary surplus is indirect taxation, and fuel excise is the most flexible of those instruments: collection is immediate, the base is broad, and no legislative process is required. But that very instrument pushes up the most visible item in headline inflation. The 35.7% growth in tax revenue, with income tax up 51.8% and corporation tax up 46.9%, shows that this collection pressure is general.

Türkiye's fiscal repair and its disinflation programme therefore pass over the same pump. When the external shock arrives on the cargo side, the fastest fiscal instrument in the Treasury's hands and the price path targeted by the central bank are pulled in opposite directions. This is not a policy error but a constraint: protecting one of the two objectives requires conceding on the other, and as long as energy prices stay high the gap does not narrow.

The market leg and the unknowns

The financial leg of the shock was seen in the same week. The BIST 100 index closed on 16 September at 13,122.58 points, down 769.72 points or 5.54%; according to Takvim, trading volume was 262 billion lira, the banking index fell 6.38%, the holding index 6.48% and the leasing and factoring index 9.74%, and 17 stocks hit their lower limit. The index fluctuated between 12,817 and 13,877 points during the day; it was the third consecutive day of decline. 17 September opened down 1.32% at 12,948.83 points.

The trigger was not only local: on 16 September the US Federal Reserve raised its policy rate by 25 basis points to the 3.75-4.00% range. The dollar/lira rate closed the day at 48.6520 lira and the euro reached 55.8063 lira. In an environment of rising global rates, the risk premium of an energy-importing economy can rise independently of domestic policy decisions as well; that is an external constraint narrowing the local decision-maker's room for manoeuvre.

There are three things this report does not know. First, the repair time for the AVT-3 unit that was hit; second, whether the ban will genuinely be lifted on 31 October, since the ban itself was never formally announced; third, from which sources and at what shipping cost the Russian cargo allocation Türkiye has lost is being substituted. Until these three unknowns are resolved, there is no data-based answer to the question of whether the increase at the pump is permanent or temporary. The single indicator to watch is not crude oil itself but the path of the Mediterranean diesel product premium, stripped of the exchange rate and tax effects.