Sanctions against Russia also hurt the EU

EU Council President Charles Michel has described it as an “extraordinary achievement”.

“It’s more important than ever to show that we can be strong, we can be determined [dhe] “We can be tough,” said Michel.

With the decision taken on May 31, the European Union has pledged to ban 90 percent of oil imports from Russia – as a punitive measure for the occupation of Ukraine. Temporary exemptions from the ban will be made by Hungary, Slovakia and the Czech Republic, which are more dependent on Russian oil. They will continue to supply the product through the Druzhba pipeline, but it has not been made clear how long.

Russia supplies about a quarter of the oil imported from EU countries. That means about 2.2 million barrels of crude oil per day and another 1.2 million barrels of petroleum products. According to the American Carnegie Endowment Institute, these shipments provide Russia with over one billion dollars a day.

The European Union (EU) has said sanctions on Russian oil “will cripple” Russian President Vladimir Putin’s war machine in Ukraine. But the Kremlin has warned it will redirect its oil exports to other countries to minimize losses from the EU embargo.

“These sanctions will, of course, have a negative impact, perhaps on the whole continent – on the Europeans, on us and on the entire global energy market. “We are redirecting oil volumes in alternative directions,” said Kremlin spokesman Dmitry Peskov.

One direction for Russia could be India. This country is one of those who have benefited from buying Russian oil at a cheaper price since the US banned its imports from Russia in March. The ban on Russian oil until the end of this year has been announced by the United Kingdom.

Market analysts are convinced that this situation will further increase prices. Oil prices have risen more than 55% this year and are at their highest level since 2008. Following the EU announcement of the embargo, the price of Brent crude has reached $ 124.10 a barrel – which is highest level since March.

Ben McWilliams, a research analyst at the Bruegel Institute for Economics, told Radio Free Europe / Radio Liberty’s Expose program that the price trajectory will continue to grow until Western countries make it clear how oil supplies will be secured. He also warns that the non-activation of sanctions by the end of the year will strengthen Russia in the short term.

“There is a risk that this will be a bonus for Russia, because the oil embargo is sending signals to global markets and raising prices. “And as long as Russia continues to sell oil to Europe, it will benefit from higher prices.”

“But in the long run, it will hurt Russia. Russia exports large quantities of oil to Europe, especially from western ports in the Baltic and Black Seas. “Redirecting this oil to other consumers – who could be Asian consumers – is very expensive and logistically difficult,” said McWilliams.

The EU has taken care to make it even more difficult to redirect Russian oil to third countries. Over 90 per cent of the world’s ships are insured by an insurance association in London, known as the International Group. Following the agreement with the United Kingdom, the EU has decided to include in the package of sanctions against Russia a measure that prohibits the provision of ships transporting Russian oil.

Ben McWilliams, of the Bruegel Institute, says Russia will feel the real power of sanctions the moment they take effect, but over time, he adds, it will build new infrastructure and form new alliances. McWilliams cites examples of two countries that have faced sanctions:

“Iran and Venezuela continue to face difficulties due to sanctions on oil. But, slowly and gradually, they are learning and finding ways to overcome sanctions. “So the most difficult period is when the implementation of sanctions begins.”

But without consequences it seems that even the EU itself will not pass – at least for a while – given the large amount of oil it provides from the Russian state. According to the European Statistics Agency, Eurostat, Russia has provided the EU with 24.8 percent of oil in 2021, Norway 9.4 percent, the US 8.8 percent and other countries less.

Patrick De Haan, from technology company GasBuddy, which tracks the movement of fuels in real time, tells the Expos that EU countries, from January 2023, will have to replace almost all Russian oil shipments – a task not impossible, but difficult.

“The United States has promised to send crude oil to the European Union. “But it will be a very difficult and very painful task, simply because Russia is one of the largest oil producers in the world and it is difficult to find additional oil from other countries.”

“As we approach winter, there may be an energy crisis, not only because of oil, but also of liquefied natural gas. Of course, the EU has not stopped the flow of gas from Russia, but Russia, in retaliation, can stop it. “It could cause a very severe winter in the coming months.”

* This material was realized before Russia started the large-scale invasion of Ukraine:

Countries in Europe, and beyond, have long faced rising inflation. It was initially the COVID-19 pandemic that caused it, and then it was triggered by Russia’s war in Ukraine, which also disrupted markets.

DeHaan, from the company GasBuddy, says consumers, especially in Europe, need to prepare for more expensive bills.

“Bills for heating homes can be doubled or tripled from normal. The price of fuel can be increased by 100 to 200%. “This is expected to be a very surprising winter in terms of the high energy prices we will experience,” says De Haan.

Prior to the war, the European Union received 40 percent of its gas from Russia. In March, the EU pledged to reduce these imports by two-thirds by the end of the year. But Russia has reacted first, cutting off supplies to some countries it says are unfriendly. Bulgaria and Poland have not been supplied with Russian gas since April. Finland from May.

Ben McWilliams, of the Bruegel Institute, says Russia’s next steps are unpredictable, but adds that the EU currently has neither the luxury nor the unity to stop importing Russian gas first.

“At the moment, I do not think there is political unity to sanction natural gas from Russia, because it is much more difficult to replace. We import most of the oil by tanker, so Russian oil can be replaced. “Russian gas, almost entirely, comes through pipelines and is very difficult to replace,” said McWilliams.

Ukraine’s most vocal allies in the EU, Poland and the Baltic states, say the EU should set a date when it will end Russian gas imports. But, this is not sure that it will be achieved in the near future. The EU needed six rounds of sanctions to stop Russian oil. Unity for gas is even more shaky. Russian gas heats buildings in Europe and generates electricity.

EU Energy Commissioner Kadri Simson has said the bloc is making emergency plans in the event that Russia cuts off gas. She did not give many details about them, but said that the countries are trying to store as much gas as possible./REL

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