According to diplomats involved in the discussion, support for a European Union-wide ban on Russian oil purchases is growing within the bloc, representing a significant shift in the continent’s stance on how to increase economic pressure on Moscow.
A deal on a possible EU ban on Russian crude is a long way off, and a quick decision to go ahead is unlikely, diplomats said.
Brussels has been willing to unleash harsh economic sanctions on Russia for its invasion of Ukraine, despite the risk that such measures could have repercussions on European countries whose economies are more closely tied to Russia.
Restricting Russian oil and natural gas, a source for meeting Europe’s energy needs, had been mostly off the table until recently. But EU capitals have become ready to consider further measures, as they have with other measures once considered out of reach, as Russia intensifies its attacks on Ukrainian cities and talks of peace between Moscow and Kyiv show few signs of progress.
Some EU states, for example, were once unwilling to consider disconnecting Russian banks from Swift, the international payment system. But sentiment quickly turned, with officials coalescing around a move that kept a few banks connected.
Several EU members, including Germany, remain reluctant to support an oil ban and would only consider gradual restrictions – not a sudden cut – if the situation in Ukraine deteriorates. A decision to restrict Russian natural gas is not being considered, diplomats said.
Germany and other Russian oil importers have opposed an oil ban. A small group of member countries, including Poland and the Baltic states, pushed for it, and there is now broader support among other members, diplomats say.
A European ban would be a blow to the beleaguered Russian economy, which is already suffering from Western sanctions. The energy sector accounts for up to a fifth of Russia’s gross domestic product and accounts for around 40% of its budget revenue. In 2021, exports of crude oil and petroleum products accounted for 37% of Russian export earnings, according to Brussels think tank Bruegel.
About half of Russia’s crude oil exports go to Europe. The EU and the UK paid about 88 billion euros, or $97 billion, to Russia last year for oil exports, including crude oil and derivatives, Bruegel said.
An EU ban would limit European supplies and global markets. Russia accounts for about 28% of the bloc’s total crude oil imports. While oil may flow more easily around the world than gas, a ban on Russian oil to the EU would likely send a jolt of supply to global markets.
A ban could, at least temporarily, remove around 3 million barrels per day from a global market of around 100 million barrels per day – a significant chunk in an already tight market, analysts said. Oil prices soared amid the Ukraine crisis due to worries about Russian supplies.
The EU also imports about 15% of its petroleum products, such as diesel, naphtha and fuel oil, from Russia, Bruegel said.
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 Russian oil-dependent economies, said an oil ban should at least be an option at this point. Other countries, including Denmark, have said they would back the move if a consensus emerges within the bloc, diplomats said.
“Looking at the scale of the destruction in Ukraine right now, it’s very difficult in my opinion to argue that we shouldn’t get into the energy sector, especially oil and coal,” he said. sanctions, 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 UK officials have said Prime Minister Boris Johnson’s government is pushing for a Group of Seven-wide ban. current head of the club of the world’s rich economies, invited leaders to a summit in Brussels on Thursday on the sidelines of the EU’s meeting with President Biden and a gathering of Atlantic Treaty Organization leaders North.
“By receiving energy from Russia, we continue to…provide funds to Russia. This must stop,” said Slovak Foreign Minister Ivan Korčok. “I expect an open discussion on this when President Biden comes.”
Any move towards an oil ban would require the support of all 27 member states, and diplomats said there was no consensus at this stage. During Monday’s discussion, according to the diplomats involved, Hungary remained openly opposed to an oil purchase ban. Critically, Germany is also opposed, for now.
German officials said Berlin’s position on an oil ban was not set in stone, while it was unwilling to consider a gas ban. They said that if the situation in Ukraine deteriorates, the pressure to restrict energy purchases will increase.
If the EU avoids rushing into an oil decision and ensures that any embargo is phased in time, Germany could join us, German officials said.
German Foreign Minister Annalena Baerbock said on Friday that Germany was one of many EU countries “that cannot stop oil imports overnight”. But she said the bloc was “preparing everything” to give itself the opportunity to take such steps very soon.
France, which holds the rotating EU presidency, wants to ensure the bloc remains united on sanctions and does not want to isolate Germany or other countries that are heavily dependent on Russian oil, officials say. However, Paris is in favor of numbering the sanctions.
International crude prices hit $114 a barrel on Monday after a sell-off late last week. Russian Deputy Prime Minister Alexander Novak warned the West on Monday that an oil ban would cause prices to soar above $300 a barrel.
“It is absolutely obvious that the rejection of Russian oil will lead to catastrophic consequences for the world market,” Novak was quoted by state news wire TASS as saying.
While it would be easier for Europe to replace the flow of oil than that of natural gas, several challenges arise in the short term. The EU’s internal pipeline infrastructure is designed for east-west flows, and transporting crude oil and products in the opposite direction would require other means of transport such as rail, truck and river barges, Bruegel said in a report last week. Many European refineries, meanwhile, are optimized to use Russian oil and would be less efficient if they produced with a different quality of crude.
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