Europe is turning its back on Russian coal. Is oil next?

All forms of Russian coal will be banned in the European Union, a move the European Commission says would affect around 8 billion euros ($8.7 billion) of Russian exports a year. Europe plans to cut imports in next four months, EU source says told CNN Business.

It is the first time that Europe has attacked Russia’s vast energy sector, but it does not go far enough for Ukraine, which on Friday reiterated its call for an oil embargo after a missile strike on a rail terminal in Kramatorsk, Ukraine, killed about 30 people and injured hundreds, according to President Volodymyr Zelensky.

“How much longer can Europe ignore the introduction of an embargo against oil supplies from Russia?” said Zelensky.

The European Commission says around 45% of the bloc’s natural gas imports, and around 25% of its oil imports, come from From Russia. The European Union has imported about 35 billion euros ($38 billion) worth of Russian energy since the start of the war.

Coal has always been the easiest target: Europe imports nearly half of its coal from Russia, but demand for the world’s dirtiest fossil fuel was already falling, and alternative supplies are more readily available than for natural gas.

Yet the shocking reports from Bucha and Kramatorsk have increased pressure on European leaders to also consider banning or restricting oil imports from Russia.

How likely is an oil ban?

Russia is the world’s second largest exporter of crude oil, behind Saudi Arabia, and accounted for 14% of global supply last year, according to the International Energy Agency. Nearly two-thirds of its exports were destined for Europe before Russia invaded Ukraine.

In March, Europe set itself a 2027 deadline to wean itself off Russian gas and oil. But an oil embargo that begins much earlier is now firmly on the table. European Commission President Ursula von der Leyen told the European Parliament on Wednesday that the fifth sanctions package “will not be [its] last.”

“Yes, we have banned coal now, but now we have to look at oil,” she added.

French President Emmanuel Macron was one of the first leaders to openly support a total ban on Russian oil. Speaking to a French broadcaster on Monday, Macron said there were “very clear signs” that war crimes had been committed in Bucha and that Europe “I can’t let it slide.”

French Finance Minister Bruno Le Maire told CNN on Friday that France did not want to wait to ban Russian oil after seeing the train attack earlier in the day.

“As far as France is concerned, we are ready to go further and decide on an oil ban and I am deeply convinced that the next steps and the next discussions will focus on this issue of the ban on Russian oil”, a- he declared.

German Chancellor Olaf Scholz said on Friday he believed Germany would be able to stop importing Russian oil “this year”. Speaking at a press conference with British Prime Minister Boris Johnson during a visit to London, Scholz said Germany was “actively working” to become independent of Russian oil imports, but added that Germany would need more time to wean itself off Russian gas.

More details on the oil sanctions could come as early as Monday, when EU foreign ministers meet for talks. Options on the table include taxing oil imports and requiring buyers to pay into an escrow account that could only be tapped by Russia under certain conditions.

Getting all EU member states on board can be tricky. Dependence on Russian oil varies considerably within the European Union. Hungary is particularly exposed and Viktor Orban, the country’s newly re-elected prime minister and longtime ally of President Vladimir Putin, could sabotage any proposal.

“While we condemn Russia’s armed offensive and we also condemn the war, we will not allow Hungarian families to pay the price of war,” Orban said in a statement in early March.

“Sanctions should not be extended to oil and gas areas,” he added.

Could Europe cope?

While sanctions on Russian natural gas are unlikely at this stage due to the economic damage they would cause, Europe might be more resilient to an embargo on Russian oil.

The US, UK, Canada and Australia have all announced bans on Russian oil, and a wider de facto embargo has already taken hold as banks, traders, shippers and insurance companies are trying to avoid falling under financial penalties.

European oil companies including Shell, TotalEnergies and Neste have stopped buying Russian crude, or will do so by the end of this year.

The price of Brent crude, the global benchmark, climbed in early March to briefly top $139 a barrel – a 14-year high – but has since fallen back to trade around $100 a barrel. And Ural-grade Russian crude is trading around $34 a barrel below, a record discount.
In recent days, rich countries have promised to exploit their oil reserves to help drive down prices and counter a reduction in Russian supplies. In March, the United States announced that it would release 180 million barrels. IEA member countries followed suit, adding another 60 million barrels to global stocks.

Claudio Galimberti, Vice President of Analytics at Rystad Energy, said the impact of an EU oil embargo on Russia would depend on the extent to which it could divert exports to Asia.

“As long as it manages to divert most of its oil exports from Europe to Asia, the impact might be – relatively speaking – not massive. Otherwise, it would completely cripple the Russian economy, as it is highly dependent on oil exports,” he said. CNN Business.

While Europe accounts for more than half of Russia’s oil exports, China is the biggest buyer, accounting for around 20%, according to the IEA.

CNN’s Chris Liakos, Niamh Kennedy, Mark Thompson, Emmet Lyons and Sugam Pokharel contributed to this report.


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