EU ban on Russian oil. I'll believe it when I see it.
Europe gets almost 50% of it's energy from Russia, whereas Russia only receives about 19% of it's GDP from such sales, and has China willing to buy oil if the EU pushes a ban. The EU has more to lose than Putin. He knew this before he invaded.
EU Support Grows for Russia Oil Ban Over Ukraine War
As Moscow’s assault continues with no peace deal in sight, European capitals consider a move that was once off the table
German officials said pressure could grow to restrict energy purchases from Russia. An oil terminal in Wilhelmshaven.
By Laurence Norman and Georgi Kantchev, WSJ
Updated March 21, 2022 2:02 pm ET
Support for a European Union-wide ban on the purchase of Russian oil is growing inside the bloc, according to diplomats involved in the discussion, representing a significant shift in the continent’s stance toward how to ratchet up economic pressure on Moscow.
Agreement on any EU ban of Russian crude is far from locked in yet, and a rapid decision to move ahead isn’t likely, diplomats said.
Brussels has been willing to unleash severe economic sanctions against Russia for its invasion of Ukraine, despite the risk that those measures could have repercussions for European countries whose economies are more intertwined with Russia.
Restricting Russian oil and natural gas, a source to fulfill Europe’s energy needs, had been mostly off the table until recently. But EU capitals have become open to consider further steps, as they have with other measures once thought off limits, as Russia intensifies its attacks on Ukrainian cities and peace talks between Moscow and Kyiv show little sign of progress.
Some EU states, for instance, were once unwilling to consider disconnecting Russian banks from Swift, the international payment system. But sentiment turned quickly, with officials coalescing around a move that allowed for a few banks to remain connected.
Several EU members, including Germany, remain reluctant to support an oil ban, and would only consider gradual restrictions—not a sudden cutoff—if the situation in Ukraine deteriorates. A move to restrict Russian natural gas isn’t being considered, diplomats said.
Germany and other Russian oil importers have been opposed to an oil ban. A smaller group of member countries, including Poland and the Baltic states, have been pushing it, and there is now broader support among other members, diplomats say.
A European ban would be a blow for the beleaguered Russian economy, already suffering from Western sanctions. The energy sector contributes as much as one-fifth of Russia’s gross domestic product and makes up around 40% of its budget revenue. In 2021, crude oil and petroleum product exports made up 37% of Russian export revenue, according to the Brussels-based think tank Bruegel.
Around half of Russia’s crude oil exports go to Europe. The EU and U.K. paid around 88 billion euros, equivalent to $97 billion, to Russia for oil exports last year, including crude oil and products, Bruegel said.
An EU ban would constrain European supplies—and global markets. Russia represents around 28% of the bloc’s overall crude oil imports. While oil can flow more easily around the world than gas, a ban of Russian oil to the EU would likely send a supply jolt across global markets.
A ban could, at least temporarily, take out around 3 million barrels a day from a global market of around 100 million barrels a day—a significant chunk in an already tight market, analysts say. Oil prices have soared amid the Ukraine crisis over worry about Russian supply.
The EU also imports from Russia some 15% of its oil products, such as diesel, naphtha and fuel oil, Bruegel said.
Russia’s attack on Ukraine helped push the price of oil to over $100 a barrel for the first time since 2014. Here’s how rising oil costs could further boost inflation across the U.S. 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 most Russian-oil-dependent economies in the bloc, said a ban on oil should at least be an option at this point. Other countries, including Denmark, have said they would support the move if consensus emerges in the bloc, diplomats said.
“Looking at the extent of the destruction in Ukraine right now, it’s very hard in my view to make the case that we shouldn’t be moving into the energy sector—particularly oil and coal,” for sanctions, Ireland’s Foreign Minister Simon Coveney told reporters on the way into the meeting.
The U.S. and U.K. have already banned Russian oil imports, and British officials said that Prime Minister Boris Johnson’s government has been pushing for a Group of Seven-wide ban. Germany, current head of the club of the world’s rich economies, has invited leaders to a summit in Brussels on Thursday on the sidelines of the EU meeting with President Biden and a gathering of leaders of the North Atlantic Treaty Organization.
“Through receiving energy from Russia we continue to…provide funds to Russia. This must be stopped,” said Slovak Foreign Minister Ivan Korčok. “I expect an open discussion about that when President Biden comes.”
Any move toward an oil ban would need support from all 27 member states, and diplomats said there is no consensus at this point. In Monday’s discussion, according to diplomats involved in them, Hungary remained outspoken against an oil purchase ban. Critically, Germany is also opposed, for now.
German officials said that Berlin’s position on an oil ban isn’t set in stone, while it isn’t willing to consider a gas ban. They said that if the situation in Ukraine deteriorates, pressure to restrict energy purchases would grow.
If the EU avoids rushing into a decision on oil and ensures that any embargo would be phased in over time, Germany could come on board, the German officials said.
German Foreign Minister Annalena Baerbock said Friday that Germany is one of a number of EU countries “who cannot stop the oil imports from one day to the other.” But she said the bloc is “preparing everything” to give itself the option of taking such steps very soon.
France, which holds the EU’s rotating presidency, wants to ensure the bloc stays united on sanctions and doesn’t want to isolate Germany or other countries who are heavily reliant on Russian oil, according to officials. However, Paris favors dialing up the sanctions.
International crude prices rose to $114 a barrel on Monday, climbing sharply from a selloff late last week. Russian Deputy Prime Minister Alexander Novak warned the West on Monday that an oil ban would lead to prices surging to more than $300 a barrel.
“It is absolutely obvious that the rejection of Russian oil will lead to catastrophic consequences for the world market,” Mr. Novak said, quoted by state newswire TASS.
While it would be easier for Europe to replace the flow of oil than that of natural gas, there are several challenges in the short term. The EU’s internal pipeline infrastructure is designed for east-to-west flows, and moving crude oil and products in the opposite direction would need other means of transportation 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 producing with a different quality of crude.
Write to Laurence Norman at email@example.com and Georgi Kantchev at firstname.lastname@example.org