After some deliberation, the European Union has decided to prohibit the majority of Russian oil imports. Replacing Urals crude with more expensive Brent will add to the EU’s already bloated energy bill.
Nonetheless, the move will reduce Moscow’s most lucrative export revenue source and aid Vladimir Putin’s war machine.
The EU’s new sanctions package, which is set to be formalised by EU leaders later Tuesday, calls for an immediate ban on 75 percent of Europe’s Russian crude imports.
By the end of the year, this figure will have risen to 90%. The partial embargo is meant to allow sceptic Hungary and other landlocked countries to continue importing Russian oil via pipeline.
The uneven application of Europe’s most potent sanction tool is a disgrace. It will also increase energy bills for already overburdened consumers.
According to Rystad Energy, the EU imports between 3 and 3.7 million barrels of Russian Urals oil per day. Replacing 75% of that with $120-per-barrel Brent would add at least $2 billion to the monthly cost.
Nonetheless, the embargo is significant. Russian crude oil and condensate exports totaled $110 billion in 2021, accounting for more than a fifth of Moscow’s total commodity export proceeds. Even though oil can be shipped more easily than gas, Russia will struggle to fully replace lost EU exports.
According to RBC analysts, India has been buying record amounts of discounted Russian crude, but it is already running its refineries above their official capacity.
China has yet to increase imports, but its economy is less buoyant as a result of extensive Covid lockdowns. Furthermore, the EU embargo will deter non-Russian tankers from transporting Moscow’s crude.
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