BRUSSELS (AP) — The European Union’s decision to ban nearly all oil from Russia in a bid to punish the country for invading Ukraine is a blow to Moscow’s economy, but the impact could be felt by higher energy prices and other countries willing to buy some oil and weakened. Oil industry experts say.
EU leaders agreed on Monday night Cut Russian oil imports by about 90 percent over the next six months, a dramatic move that was considered unthinkable just a few months ago.
The 27 EU countries depend on Russia for 25% of their oil and 40% of their natural gas, and European countries, which are more dependent on Russia, are particularly reluctant to act.
European heads of state hailed the decision as a watershed moment, but analysts were more cautious.
The EU ban applies to all Russian oil shipped by sea. At Hungary’s insistence, it included temporary exemptions for oil sent by Russia’s Druzhba pipeline to certain landlocked countries in Central Europe.
In addition to retaining some European markets, Russia could sell some of its oil previously shipped to Europe to China, India and other Asian customers, although it must Offer discounts.
“Right now, for now, it’s not too painful for Russia economically because global prices are going up. They’re much higher than they were last year,” he said. “So even if Russia offers a discount, it means it’s probably selling oil at about the same price as last year.”
“India has always been a willing buyer,” he noted, “and of course China is keen to buy more oil because they’re all countries that get deep discounts on global market prices.”
Still, Moscow has traditionally seen Europe as its main energy market, so Monday’s decision was the most significant effort yet to punish Russia for going to war in Ukraine.
“Sanctions have a clear goal: to get Russia to end the war and withdraw its troops and to agree with Ukraine on a sensible and fair peace,” German Chancellor Olaf Schultz said.
Ukraine estimates the ban could cost Russia tens of billions of dollars.
“The oil embargo will accelerate the countdown to the collapse of Russia’s economy and war machine,” said Foreign Minister Dmitry Kuleba.
Ukraine will press for more sanctions, Ukrainian President Volodymyr Zelensky said in a video address, adding that “there should be no major economic links between the free world and terrorist states.”
Simone Tagliapietra, an energy expert and researcher at 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 now take a considerable hit, but warned that the move could ultimately backfire.
“The risk is that oil prices in general will rise due to European sanctions. If prices rise significantly, the risk is that Russia starts making more money and Europe loses the bet,” he said.
Like previous rounds of sanctions, the oil ban is unlikely to convince the Kremlin to end the war.
Moscow has used the new sanctions to try to garner public support for the West, saying it is bent on destroying Russia.
Dmitry Medvedev, deputy chairman of the Russian Security Council and former president of Russia, said the oil ban was aimed at reducing the country’s export earnings and forcing the government to scale back social benefits.
“They hate us all!” Medvedev said on his messaging app channel. “These decisions stem from hatred of Russia and its entire people.”
Russia has not shied away from withholding energy to achieve its goals. Russian state energy giant Gazprom said it was cutting off gas supplies to Dutch trader GasTerra and Denmark’s Oster, as well as halting deliveries to Europe’s Shell Energy to Germany. There are other suppliers in Germany, with GasTerra and Oersted saying they are ready to close.
Gazprom has previously stopped Bulgaria, Poland and Finland.
Meanwhile, the EU has urged other countries to avoid trade barriers on agricultural products as Russia’s war raises the risk of a global food crisis.
Zelensky has said that Russia has blocked the export of 22 million tons of Ukrainian grains, most of which are for people in the Middle East and Africa. He accused Moscow of “deliberately creating this problem”.
Russian seaborne oil accounts for two-thirds of the EU’s oil imports from Moscow. In addition to the EU cutting off such imports, Germany and Poland have agreed to stop using oil from the northern branch of the Druzhba pipeline.
Agreeing on sanctions on Russian gas could be tougher because it makes up a larger share of Europe’s energy mix.
“The very loud and clear message that Moscow will hear is that it is almost impossible for the EU to reach an agreement to block gas because gas will not be replicated as easily from other sources in Europe as oil,” Weaver said.
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 this report.
Follow AP coverage of the war at https://apnews.com/hub/russia-ukraine