Shortly after the world’s largest trading bloc agreed to put a partial embargo on Russian crude, Moscow committed to finding new importers. The European Union announced recently that most Russian oil imports will be banned by the end of the year as part of the new sanctions aimed at penalizing Russia for its unjustified invasion of Ukraine.
EU foreign policy leader Josep Borrell praised the measure, calling it a “landmark step to weaken Putin’s war machine. It applies to Russian oil imported by sea, with an exception made for shipments supplied by pipeline due to Hungary’s opposition. The EU’s long-delayed sixth tranche of measures against Russia requires unanimous consent from all 27 member states and is still awaiting formal ratification.
In response to the sanctions, Russia’s permanent envoy to international organisations in Vienna, Mikhail Ulyanov, said the oil embargo had a negative impact on the bloc. As she accurately stated yesterday, Ulyanov said on Twitter, referring to European Commission President Ursula von der Leyen, that Russia is going to explore new buyers and it is worth noting that she now contradicts her own comments. A very rapid shift in thinking suggests that the EU is in bad shape, he continued.
The EU’s von der Leyen applauded the bloc’s accord on Russian oil sanctions. She said that the policy will effectively cut roughly 90% of Russian oil imports to the EU by the end of the year and that the remainder 10% of pipeline oil will be addressed soon.
Russia accounts for over 36% of the EU’s oil imports, a country with a massively disproportionate influence in global oil markets. Russia is, without a doubt, the world’s third-largest oil producer, trailing only the United States and Saudi Arabia, as well as the world’s largest crude exporter. It also makes and ships out a lot of natural gas.
Ukraine has repeatedly demanded that the EU impose a complete embargo on Russian oil and gas, despite the fact that energy-importing countries continue to fund Putin’s war chest on a daily basis. KajaKallas, Estonia’s prime minister, called on the EU to go even farther in the next round of sanctions and to examine the possibility of a Russian gas embargo. However, Austria’s chancellor, Karl Nehammer, has flatly rejected this concept, stating that it would not be discussed in the next round of reforms.
The split comes as Gazprom, Russia’s state-owned energy giant, has completely cut off supplies to GasTerrra, a Dutch gas trader, and Orsted, Denmark’s state-owned energy company, has threatened that supplies will be cut off as well.
As good as it could possibly be
Brent crude oil prices increased by 1.5% to $123.48 per barrel, while West Texas Intermediate futures increased by 3% to $118.56. In response to the Kremlin’s onslaught, European Council President Charles Michel said the oil sanctions agreement confirmed the bloc’s unity.It had been assumed that failure to reach any sort of agreement would be viewed as a triumph for Putin.
Adi Imsirovic, senior research researcher at the Oxford Institute for Energy Studies, said that he believes it is as excellent as could be accomplished. According to Imsirovic, the EU’s decision opens the door for the bloc and the US to increase pressure on other energy-importing countries, including India, to impose similar sanctions on Russian oil.
Previously, it was impossible since it is difficult to expect India, for example, to reduce its imports if Europe does not do so. So, from a political standpoint, he believes this is critical, he remarked. According to Reuters, which cites Refinitiv Eikon statistics, India, the world’s third-largest oil importer, saw its crude imports from Russia steadily rise after Russia invaded Ukraine in late February.
In the aftermath of the Kremlin’s conflict in Ukraine, Asia’s third-largest economy has rebuffed accusations of its ongoing purchases of Russian energy, claiming that an abrupt halt to Russian oil imports would harm its consumers. Separately, Reuters reported that China has been secretly increasing its imports of Russian oil at lower prices, citing shipping statistics and anonymous oil dealers. It appears to indicate that the world’s largest crude importer is attempting to fill the void left by Western purchasers cutting connections with Russia over the humanitarian catastrophe in Ukraine.
What else has been suggested?
In addition to the EU’s oil sanctions, the group agreed to remove Sberbank, Russia’s largest bank, from the SWIFT messenger service and to ban three additional state-owned channels.
There is also a ban on EU companies insuring and reinsuring Russian ships, according to von der Leyen. The other issue that hasn’t gotten much attention is that this package will almost definitely contain a ban on shipping insurance.
He calculated that over 95% of Russian oil transport insurance was handled in Europe, particularly in London. Therefore, not only would that harm Russian exports to Europe right now, but it would impact Russian exports anywhere else as well. Restricted access to capital markets; the freezing of Russia’s central bank assets; the exclusion of Russian banking firms from SWIFT; and the prohibition of Russian coal and other commodities imports were among the five previous rounds of sanctions.
