BERLIN – Germany is now poised to stop buying Russian oil, paving the way for a European Union ban on crude oil imports from Russia, government officials said.
Berlin has been one of the main opponents of EU sanctions on oil and gas trade with Moscow.
On Wednesday, however, German officials at EU institutions overturned the country’s objection to a full Russian oil embargo, provided Berlin is given enough time to secure alternative supplies, two officials said.
The German postponement increases the likelihood that EU countries will agree on a phased embargo on Russian oil, with a decision possible as early as next week, diplomats and officials say. How quickly the bloc will end its Russian oil purchases and whether it will also use measures such as price caps or tariffs is still being negotiated. The US is urging its European allies to avoid moves that could lead to a protracted hike in oil prices.
The debate in Europe over a ban on Russian oil has shifted significantly in recent days as Germany and some other countries have taken practical steps to replace Russia with other suppliers. Some member states, including Hungary, Italy, Austria and Greece, remain cautious about the economic impact of an oil embargo, diplomats say. All 27 EU governments must agree to an oil ban.
The oil moves come as EU nations scramble to help member states Poland and Bulgaria make up for a natural gas shortage after Russia halted supplies this week in response to the two countries’ alleged refusal to pay for imports in rubles. The Kremlin is asking EU buyers to deposit into special bank accounts where deposits from euros and dollars would be converted into rubles.
The EU pays Russian state-controlled companies around €1 billion ($1.05 billion) a day for energy, according to estimates by Bruegel, a Brussels-based think tank. Critics have said these funds are funding Russian President Vladimir Putin’s regime and his war in Ukraine.
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High-level officials from EU member states discussed oil sanctions at length on Wednesday and the European Commission, the EU’s executive body, will hold further talks with EU countries in the coming days before likely presenting a proposal early next week, they say officials and diplomats.
US Treasury Secretary Janet Yellen said last week that a full European oil embargo on Russia would push up international oil prices and hurt a fragile global economy and could “actually have very little negative impact on Russia,” which would benefit from higher oil prices further its remaining exports. She suggested that Europe could continue buying oil and restrict Russia’s access to payments, echoing talk in Europe of making payments into escrow.
According to Bruegel, the EU imports between 3 and 3.5 million barrels of oil from Russia every day and sends nearly $400 million in payments every day. This corresponds to around 27% of EU oil imports. According to the International Energy Agency, oil and gas revenues accounted for 45% of Russia’s federal budget in 2021.
According to analysts and traders, many companies have sanctioned themselves and avoided trading in Russian oil over reputational concerns and the risk that the Western pressure campaign could soon engulf Moscow’s energy exports. According to the IEA, this is already contributing to a sharp decline in Russian oil exports.
EU officials drafting the next sanctions proposals must take into account that some European oil refiners will need time to adjust to receiving non-Russian crude. They also recognize that for countries like landlocked Hungary, which gets its Russian oil via pipelines, adjusting to a Russian oil embargo will be complex.
The bloc is considering the option of combining a phased exit from oil purchases with more immediate measures to reduce demand or cut payments to Moscow, such as: B. a price cap or a tariff on oil imports. Another option is to stop buying shipped oil quickly and slower deliveries via pipelines.
“There are all kinds of things we are going through,” said a senior EU official. “The goal is to hit the Russians as hard as possible while minimizing the cost.
While Germany has backed the idea of phasing out Russian oil purchases, Berlin remains skeptical about price caps, tariffs and proposals to put Russia’s oil payments in escrow.
German officials doubt that Mr Putin would keep oil supplies going if the EU unilaterally lowered the price it pays, and they warn that Russia could easily sell its oil to other customers such as India and China rather than accept a lower European price .
Berlin’s change of heart on oil came after it struck a deal with Poland that would allow Germany to import oil from global exporters through the Baltic port of Gdansk, officials said on Wednesday.
The Polish port is close to the PCK oil refinery in Schwedt, Germany, which is controlled by Russian oil giant Rosneft and receives crude oil via a Russian pipeline known as Druzhba, Russian for friendship.
Gdańsk port infrastructure, equipped to accommodate oil supertankers, is connected to the Russian pipeline via a separate Polish-operated link. This means oil imports to Gdansk could be immediately routed through the pipeline to the Schwedt refinery, replacing Russian supplies, government officials said.
Oil imports to Gdansk, Poland, could be routed to the Schwedt refinery, replacing Russian supplies.
Photo: Michal Fludra/Zuma Press
The Schwedt refinery was the biggest obstacle for Germany to accept a ban on Russian oil imports because thousands of jobs in the region depend on it and there has been no alternative supply so far, officials said.
The Polish deal was necessary because the German port closest to the refinery, Rostock, does not have the capacity to accommodate supertankers. In addition, the German railways no longer drive oil wagons. The landmark agreement was announced by German Economics Minister Robert Habeck on Wednesday during a visit to Poland.
About 12% of Germany’s oil consumption depends on Russian imports, up from 35% before the war, Mr Habeck said in a video statement posted on his ministry’s social media. He said Germany is now poised for the possibility that Rosneft would stop channeling oil, a scenario he said would no longer spell disaster for the German economy.
“Rosneft is a Russian state company and they have no interest in processing non-Russian oil,” Mr. Habeck said.
Should Rosneft refuse to process non-Russian oil imports, Germany could place the refinery under state administration to protect strategic assets. Berlin has already taken over management of Russia’s main gas trading hub in Germany, a subsidiary of Russia’s state-controlled Gazprom.
write to Bojan Pancevski at [email protected], Laurence Norman at [email protected] and Georgi Kantchev at [email protected]
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