EU leaders agreed to cut late Monday Russian oil imports Nearly 90% in the next six months, a dramatic move that was considered unimaginable a few months ago.
The 27-nation bloc relies on Russia for 25% of its oil and 40% of its natural gas, and European countries that are even more dependent on Russia were particularly reluctant to act.
European heads of state praised the decision as a watershed, but analysts were more circumspect.
The EU ban applies to all Russian oil delivered by sea. At Hungary’s insistence, this includes a temporary waiver for oil delivered by the Russian Druzhba pipeline to some landlocked countries in Central Europe.
Chris Weifer, CEO of consulting firm Macro-Advisory, said that in addition to retaining some European markets, Russia may sell some of the oil earlier to China, India and other customers in Asia, even if it has to offer a discount.
“Now, at the moment, it is not very painful for Russia financially because global prices have risen. They are much higher than last year,” he said. “So even Russia offering a discount means it’s probably selling its oil for roughly what it was last year.”
He added that “India has been a willing buyer” and “China is certainly willing to buy more oil as they are both the countries that are getting big discounts on global market prices.”
Still, Moscow has traditionally viewed Europe as its main energy market, making Monday’s decision its most significant attempt to punish Russia for its war in Ukraine.
German Chancellor Olaf Scholz said, “The sanctions have a clear purpose: to prompt Russia to end this war and withdraw its troops and to agree on a sensible and fair peace with Ukraine.”
Ukraine estimates that the sanctions could cost Russia billions of dollars.
“The oil embargo will accelerate the countdown to the collapse of the Russian economy and the war machine,” Foreign Minister Dmitro Kuleba said.
Ukraine’s President Volodymyr Zelensky said in a video address that Ukraine would push for more sanctions, adding that “there should be no significant economic ties between a free world and a terrorist state.”
Simone Taglipietra, an energy expert and research fellow at Brussels-based think tank Bruegel, called the embargo “a big blow”.
Matteo Villa, an analyst at the ISPI think tank in Milan, said Russia would now take a significant hit, but cautioned that the move could eventually backfire.
“The risk is that the price of oil in general goes up because of European sanctions. And if the price goes up too much, the risk is that Russia starts earning more, and Europe loses the bet,” he said. Told.
As in the previous round of sanctions, the oil embargo is unlikely to persuade the Kremlin to end the war.
Moscow seized on the new sanctions to try to garner public support against the West, calling it intent on destroying Russia.
Russia’s Security Council deputy chief Dmitry Medvedev, who served as the country’s president, said the oil embargo is aimed at slashing the country’s export earnings and forcing the government to curtail social benefits.
“They hate us all!” Medvedev said on his messaging app channel. “Those decisions stem from hatred against Russia and all its people.”
Russia doesn’t shy away from holding energy to find its way. Russian state energy giant Gazprom said it was cutting natural gas to Dutch trader Gastera and Denmark’s Oersted Company and was also stopping shipments to Shell Energy Europe that were bound for Germany. There are other suppliers in Germany, and Gastera and rsted said they were ready to shutoff.
Gazprom previously blocked flow into Bulgaria, Poland and Finland.
Meanwhile, the European Union is urging other countries to avoid imposing trade barriers on agricultural products as Russia’s war raises the risk of a global food crisis.
Zelensky has said Russia has halted exports of 22 million tonnes of Ukrainian grain, much of it to people in the Middle East and Africa. He accused Moscow of “deliberately creating this problem”.
Russian oil by sea accounts for two-thirds of the EU’s oil imports from Moscow. In addition to the EU cutoff of such 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 prove very difficult as it represents a large percentage of Europe’s energy mix.
“The very loud and clear message that Moscow will hear is that it will be impossible for the EU to reach an agreement on blocking gas because the gas will not be replicated from other sources in Europe as easily as oil will,” Wafer said.