EU ban on Russian oil may be blunted by rising energy prices
| Brussels
The European Union鈥檚 groundbreaking decision to ban nearly all oil from Russia to punish the country for its invasion of Ukraine is a blow to Moscow鈥檚 economy, but its effects may be blunted by rising energy prices and other countries willing to buy some of the petroleum, industry experts say.
European Union leaders agreed late Monday to cut Russian oil imports by about 90% over the next six months, a dramatic move that was considered unthinkable just months ago.
The 27-country bloc relies on Russia for 25% of its oil and 40% of its natural gas, and European countries that are even more heavily dependent on Russia had been especially reluctant to act.
European heads of state hailed the decision as a watershed, but analysts were more circumspect.
The EU ban applies to all Russian oil delivered by sea. At Hungary鈥檚 insistence, it contains a temporary exemption for oil delivered by the Russian Druzhba pipeline to certain landlocked countries in Central Europe.
In addition to retaining some European markets, Russia could sell some of the oil previously bound to Europe to China, India, and other customers in Asia, even though it will have to offer discounts, said Chris Weafer, CEO at consulting firm Macro-Advisory.
鈥淣ow, for the moment, that鈥檚 not financially too painful for Russia because global prices are elevated. They鈥檙e much higher than last year,鈥� he said. 鈥淪o even Russia offering a discount means that it鈥檚 probably selling its oil for roughly what it sold for last year also.鈥�
He noted that 鈥淚ndia has been a willing buyer鈥� and 鈥淐hina鈥檚 certainly been keen to buy more oil because they鈥檙e both countries who are getting big discounts on global market prices.鈥�
Still, Moscow has traditionally viewed Europe as its main energy market, making Monday鈥檚 decision the most significant effort yet to聽punish Russia for its war in Ukraine.
鈥淭he sanctions have one clear aim: to prompt Russia to end this war and withdraw its troops and to agree with Ukraine on a sensible and fair peace,鈥� German Chancellor Olaf Scholz said.聽Ukraine estimated the ban could cost Russia tens of billions of dollars.
鈥淭he oil embargo will speed up the countdown to the collapse of the Russian economy and war machine,鈥� Foreign Minister Dmytro Kuleba said.
Simone Tagliapietra, an energy expert and research fellow at the Brussels-based think tank Bruegel, called the embargo 鈥渁 major blow.鈥�
Matteo Villa, an analyst at the ISPI think tank in Milan, said Russia will take a pretty significant hit now but cautioned that the move could eventually backfire.
鈥淭he risk is that the price of oil in general goes up because of the European sanctions. And if the price goes up a lot, the risk is that Russia starts to earn more, and Europe loses the bet,鈥� he said.
Like previous rounds of sanctions, the oil ban is unlikely to persuade the Kremlin to end the war.
Moscow seized on the new sanctions to try to rally public support against the West, describing it as bent on destroying Russia.
Russia has not shied away from withholding energy to get its way. Russian state energy giant Gazprom said it is cutting off natural gas to Dutch trader GasTerra and Denmark鈥檚 Oersted company and is also stopping shipments to Shell Energy Europe that were bound for Germany. Germany has other suppliers, and GasTerra and Oersted said they were prepared for a shutoff.
Gazprom previously stopped the flow to Bulgaria, Poland, and Finland.
Meanwhile, the EU is urging other countries to avoid placing trade barriers on farm products as Russia鈥檚 war increases the risks of a global food crisis.
Ukrainian President Volodymyr Zelenskyy has said Russia has prevented the export of 22 million tons of Ukrainian grain, much of it meant for people across the Middle East and Africa. He accused Moscow of 鈥渄eliberately creating this problem.鈥�
Russian oil delivered by sea accounts for two-thirds of the EU鈥檚 oil imports from Moscow. In addition to the EU cutoff of such imports, Germany and Poland have agreed to stop using oil from the northern branch of the Druzhba pipeline.
Agreeing on sanctions against Russian natural gas is likely to prove much tougher because it represents a larger percentage of Europe鈥檚 energy mix.
鈥淭he very loud and clear message that Moscow will hear is that it will be near impossible for the European Union to get any agreement on blocking gas because gas will not be as easily replicated from other sources in Europe as oil will be,鈥� Mr. Weafer said.
This story was reported by The Associated Press.聽AP writers Yuras Karmanau in Lviv, Ukraine; Mike Corder in The Hague, Netherlands; Colleen Barry in Milan, Italy; and, Derek Gatopoulos in Athens contributed to this report.
