Support for a pan-European ban on the purchase of Russian oil is growing within the bloc, diplomats who participated in the discussion said, signaling a significant change in the continent’s position on how to increase economic pressure on Moscow.
Agreement on any EU ban on Russian oil is far from over, diplomats said, and a quick decision to move forward is unlikely.
Brussels was prepared to impose tough economic sanctions on Russia for its invasion of Ukraine, despite the risk that the measures could have repercussions for European countries whose economies are more closely linked to Russia.
Limiting the production of Russian oil and natural gas, a source for meeting Europe’s energy needs, has been largely undiscussed until recently. But EU capitals have become poised to consider moving forward, as they have done with other measures once considered excessive, as Russia intensifies its attacks on Ukrainian cities and peace talks between Moscow and Kiev show no signs of progress.
Some EU states, for example, once did not want to consider the possibility of disconnecting Russian banks from the international payment system Swift. But sentiment quickly changed, and officials coalesced around a move that allowed several banks to remain connected.
Several EU members, including Germany, remain reluctant to support an oil ban and will only consider gradual restrictions rather than a sudden shutdown if the situation in Ukraine worsens. According to diplomats, the proposal to limit Russian natural gas is not being considered.
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Germany and other Russian oil importers oppose the oil ban. A smaller group of member countries, including Poland and the Baltic states, have promoted it, diplomats said, and there is now broader support among other members.
A European ban would be a blow to the beleaguered Russian economy, already suffering from Western sanctions. The energy sector makes up one fifth of Russia’s gross domestic product and accounts for about 40% of budget revenues. According to the Brussels think tank Bruegel, in 2021 the export of crude oil and petroleum products accounted for 37% of Russia’s export earnings.
About half of Russia’s crude oil exports go to Europe. According to Brueghel, the EU and the UK paid Russia about 88 billion euros, equivalent to $97 billion, for oil exports last year, including crude oil and oil products.
An EU ban would restrict European supplies and global markets. Russia accounts for about 28% of the bloc’s total crude oil imports. While oil can move around the world more easily than gas, a ban on Russian oil in the EU is likely to spark a surge in global supply.
Analysts say the ban could, at least temporarily, take about 3 million barrels a day out of a global market of about 100 million barrels a day, a significant share of an already tough market. Oil prices rose sharply amid the Ukrainian crisis due to concerns about supplies from Russia.
The EU also imports about 15% of its petroleum products, such as diesel, naphtha and fuel oil, from Russia, Brueghel said.
Russia’s attack on Ukraine helped drive the price of oil above $100 a barrel for the first time since 2014. Here’s how rising oil prices can further increase inflation in the US economy. Photo illustration: Todd Johnson
At a meeting of the bloc’s foreign ministers in Brussels on Monday, countries including Sweden, Ireland, Slovenia, the Czech Republic and Slovakia, one of the bloc’s most dependent on Russia economies, said a ban on oil should at least be an option for now. moment. Diplomats said other countries, including Denmark, said they would support the move if there was a consensus in the bloc.
“Looking at the extent of the destruction in Ukraine right now, it is very difficult in my opinion to justify that we should not move into the energy sector, especially into oil and coal,” said Irish Foreign Minister Simon Coveney. journalists on the way to the meeting.
The US and UK have already banned imports of Russian oil, and British officials have said Prime Minister Boris Johnson’s government is pushing for a G7 ban. Germany, the current head of the club of the world’s wealthy economies, invited leaders to a summit in Brussels on Thursday on the sidelines of the EU’s meeting with President Biden and the North Atlantic Treaty Organization leaders’ meeting.
“Receiving energy from Russia, we continue to… provide funds to Russia. This must be stopped,” said Slovak Foreign Minister Ivan Korchok. “I look forward to an open discussion about this when President Biden arrives.”
Diesel plant at the Russian oil field in the Irkutsk region.
Photo: VASILY FEDOSENKO/REUTERS
Any move to ban oil would require support from all 27 member states, and diplomats said there was no consensus at the moment. During Monday’s discussion, according to the diplomats who participated in it, Hungary remained openly opposed to the ban on oil purchases. Crucially, Germany is also opposed so far.
German officials have said that Berlin’s stance on the oil ban is not firm, while it is unwilling to consider a gas ban. They said that if the situation in Ukraine deteriorates, pressure to limit energy purchases will increase.
If the EU does not rush into a decision on oil and ensures that any embargo is phased in over time, Germany could join in, according to German officials.
German Foreign Minister Annalena Burbock said on Friday that Germany is one of the EU countries “that cannot stop oil imports day in and day out.” But she said the bloc is “preparing everything” to enable itself to take such steps very soon.
France, which holds the rotating EU presidency, wants the bloc to remain united on sanctions and doesn’t want to isolate Germany or other countries heavily dependent on Russian oil, officials said. However, Paris is in favor of tougher sanctions.
World oil prices rose to $114 a barrel on Monday, rising sharply after a sell-off late last week. Russian Deputy Prime Minister Alexander Novak warned the West on Monday that the oil ban would push prices up to more than $300 a barrel.
“It is absolutely clear that ditching Russian oil would have catastrophic consequences for the global market,” said Mr. Novak, quoted by the state-run TASS news outlet.
While it would be easier for Europe to replace the flow of oil than the flow of natural gas, there are several problems in the short term. The internal pipeline infrastructure of the EU is designed for east-west flows, and other means of transport such as rail transport, trucks and river barges will be needed to transport crude oil and oil products in the opposite direction, Brueghel said in a report last week. In the meantime, many European refineries are optimized to use Russian oil and will be less efficient if they produce crude of a different quality.
Write to Lawrence Norman: [email protected] and Georgy Kanchev: [email protected]
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