No longer whether, but how: European efforts are leading to a blockade of Russian oil imports, which is to be included in the next package of sanctions. Meanwhile, the Kremlin is struggling to place the product – and NASA satellites are photographing the decline in production
The European Union is officially moving towards an embargo on Russian oil. The commission is working on restraining some member states (most notably Germany) to ensure the next package of sanctions, the sixth, will “certainly” include a measure to limit oil imports from Moscow, an official commission confirmed on Wednesday. Minus an adjustment period, according to Bruegel, the effects on the EU are completely manageable.
Berlin has already indicated that it wants to stop Russian oil supplies by the end of the year; in Brussels they are looking for ways to speed up the maneuver and reduce costs. A source for the commission revealed to Reuters that the team carried out Ursula von der Leyen is in dialogue with oil producing nations to facilitate the organization of supply contracts at national level quickly and cheaply. At the same time, she is preparing an impact assessment of the Russian oil embargo, which may be presented to the member countries as early as next week.
The main opposition to the total blockade comes from Germany, which imported a third of its crude oil from Russia in 2021. But according to rumors obtained by Reuters, lifting the Berlin veto would also make other states change their minds. So we see a compromise: extending the phase-out period for Russian oil imports, as was the case for coal (Germany has extended the tolerance window from three to four months). Von der Leyen spoke to Bild am Sonntag about “clever mechanisms” to get oil included in the sanctions package. There is also talk of differentiating the different types of petroleum products.
The extent of the damage an oil embargo would do to the Kremlin is difficult to underestimate, given that it is its largest source of revenue besides gas, and the EU absorbs half of Russia’s exports. In fact, several Western companies have not already unilaterally stopped trading with Russia. The mere prospect of a European blockade has prompted operators to be wary, so much so that Russian oil now has a much smaller market – and Moscow has to offer it at bargain prices to those willing to buy. For this reason, according to the commission, “the Kremlin is already losing money”.
The impact of the “spontaneous” sanctions can already be measured without going through official Russian data, subject to the deformation of the Kremlin, which is doing everything it can to hide the damage the Russian economy has suffered. but Wladimir Putin cannot hide the behavior of its oil companies from the eyes of satellites, which can show that Moscow (nearly two months after the invasion) is “succumbing” to the blows of government sanctions and self-restraint by Western companies.
Using NASA photos, OilX analysts have measured the brightness of the flames produced in Siberia’s oil fields. That data, combined with anecdotal information from market participants and rumors filtered by Russian officials, led Bloomberg to estimate that average Russian oil production has fallen to just over 10 million barrels a day from 11 in March. And analysts expect the decline to continue.
The upcoming sanctions will not only affect oil. According to rumours, a blockade of Russian nuclear fuel is also planned at the German suggestion, on which several countries in Eastern Europe depend. The exclusion of two more banks, Sberbank and Gazpromneft, from the Swift international payment system (a move that would only see Gazprombank “connected”) to the system, the suspension of Russian visas, and the closure of other Russian issuers are also being considered RTR Planeta and R24. Meanwhile, the date of May 4th, which is likely to mark Russia’s virtual default, is approaching.