BRUSSELS (AP) – The European Union’s innovative decision to ban almost all of Russia’s oil to punish the country for its invasion of Ukraine is a blow to Moscow’s economy, but its effects could be reduced by rising energy prices and other countries willing to buy some. of oil, say industry experts.
European Union leaders agreed on Monday afternoon to reduce Russian oil imports by 90% over the next six months, a dramatic move that was deemed unthinkable just a few months ago.
The bloc of 27 countries depends on Russia for 25% of its oil and 40% of its natural gas, and European countries that depend even more on Russia had been particularly reluctant to act.
European heads of state praised the decision as a turning point, but analysts were more cautious.
The EU ban applies to all Russian oil delivered by sea. At Hungary’s insistence, it contains a temporary exemption for oil delivered by the Russian Druzhba pipeline to certain landlocked countries in Central Europe.
In addition to retaining some European markets, Russia could sell some of the oil that was previously destined for Europe to China, India and other Asian customers, although it will have to offer discounts, said Chris Weafer, CEO from the consulting firm Macro-Advisory.
“Right now, this is not too painful economically for Russia because global prices are high. They are much higher than last year,” he said. “So even Russia offering a discount means it’s probably also selling its oil for about what it sold last year.”
He noted that “India has been a willing buyer” and “China has certainly been eager to buy more oil because both are countries that receive big discounts on global market prices.”
However, Moscow has traditionally seen Europe as its main energy market, making Monday’s decision the most important effort to date to punish Russia for its war in Ukraine.
“Sanctions have a clear goal: to push Russia to end this war and to withdraw its troops and to make a reasonable and just peace with Ukraine,” said German Chancellor Olaf Scholz.
Ukraine estimated that the ban could cost Russia tens of billions of dollars.
“The oil embargo will accelerate the countdown to the collapse of the Russian economy and the war machine,” Foreign Minister Dmytro Kuleba said.
Ukrainian President Volodymyr Zelenskyy said in a video address that Ukraine would call for more sanctions, adding that “there should be no significant economic link between the free world and the terrorist state.”
Simone Tagliapietra, an energy expert and researcher at the Brussels-based think tank Bruegel, called the embargo a “major blow”.
Matteo Villa, an analyst at the ISPI think tank in Milan, said Russia would be quite significant now, but warned that the move could be counterproductive.
“The risk is that the price of oil in general will rise due to European sanctions. And if the price goes up a lot, the risk is that Russia will start earning more, and Europe will lose the bet, “he said.
Like previous rounds of sanctions, the oil ban is unlikely to persuade the Kremlin to end the war.
Moscow took advantage of the new sanctions to try to gather public support against the West, describing it as determined to destroy Russia.
Dmitry Medvedev, the deputy head of Russia’s Security Council who served as the country’s president, said the ban on oil was aimed at reducing the country’s export earnings and forcing the government to cut social benefits.
“They hate us all!” Medvedev said on his messaging application channel. “These decisions stem from hatred against Russia and all its people.”
Russia has not shied away from holding back energy to get out of its way. Russian state energy giant Gazprom has said it is cutting off natural gas to Dutch trader GasTerra and Danish company Oersted and is also stopping shipments to Shell Energy Europe from Germany. Germany has other suppliers and GasTerra and Oersted said they were ready for closure.
Gazprom previously stopped the flow in Bulgaria, Poland and Finland.
Meanwhile, the EU is urging other countries to avoid placing trade barriers on agricultural products, as the Russian war increases the risk of a global food crisis.
Zelenskyy said Russia had banned the export of 22 million tonnes of grain from Ukraine, much of it to people from all over the Middle East and Africa. He accused Moscow of “deliberately creating this problem.”
Russian oil delivered by sea accounts for two-thirds of EU oil imports from Moscow. In addition to the EU’s cut in imports, Germany and Poland have agreed to stop using oil from the northern branch of the Druzhba pipeline.
Agreeing on sanctions against Russian natural gas is likely to be much tougher because it represents a larger percentage of Europe’s energy mix.
“The very clear message that Moscow will hear is that it will be almost impossible for the European Union to reach an agreement on blocking the gas because gas will not be reproduced as easily from other sources in Europe as oil,” he said. Weafer. .
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Associated Press reporters Yuras Karmanau in Lviv, Ukraine, Mike Corder in The Hague, The Netherlands, Colleen Barry in Milan, Italy, and Derek Gatopoulos in Athens, contributed to the report.
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