Impact of The European Union's Oil Embargo on Russia
- 08-Jun-2022 5:40 PM
- Journalist: Francis Stokes
The European Union has decided to put an embargo on Russian oil imports as part of toughening the bloc's sanctions campaign against Moscow for its war crimes in Ukraine. It's a watershed move that will affect Russian coffers in the long run but could also hurt European consumers. According to industry experts, this decision will reroute trade flows and keep prices high, at least in the short term. The decision was made on late Monday at a European Union leaders’ summit in Brussels, amid rising energy prices in Europe, and could lead to further increases later this year as countries fight for natural gas supplies to heat homes and power plants.
The EU's leaders have agreed to decrease Russian oil imports by over 90% over the next six months, a radical move that was inconceivable only a few months ago. Russia provides 25% of the oil consumed by the 27-nation union. All Russian oil carried by water is subjected to the embargo. It includes a temporary exemption for Oil delivered to several landlocked Central European nations through the Russian Druzhba pipeline. Germany and Poland have agreed to no longer use oil from the pipeline's northern branch.
Oil carried by pipeline from Russia has been temporarily spared from the restriction to give landlocked nations like Hungary, Slovakia, and the Czech Republic more time to substitute oil and products from other sources. The accord, which is part of the European Union 's sixth round of sanctions against Russia, essentially prohibits the purchase of Russian seaborne oil and oil products (about four million barrels per day, or two-thirds of Russian imports into the European Union.
In electronic trading on the New York Mercantile Exchange just hours before the start of U.S. markets on Wednesday, benchmark U.S. crude values rose $1.25 to $115.92 per barrel. According to analysts, the sanctions are unlikely to impact Russia badly in the near future due to high oil prices, but they will deprive Moscow of one of its most important oil consumers for a long time.