BRUSSELS (AP) – The European Union’s revolutionary decision to ban almost all Russian oil to punish the country for its invasion of Ukraine is a blow to Moscow’s economy, but its effects could be blunted by rising energy prices and more. countries willing to buy some of the oil, industry experts say.
Late Monday, European Union leaders agreed to cut Russian oil imports by about 90% over the next six months, a dramatic move that was considered unthinkable just months ago.
The 27-nation bloc relies on Russia for 25 percent of its oil and 40 percent of its natural gas, and European countries, which are even more dependent on Russia, have been particularly willing to act.
European heads of state hailed the decision as a turning point, but analysts were more cautious.
The EU ban applies to all Russian offshore oil. At Hungary’s insistence, it contains a temporary exemption for oil delivered via Russia’s Druzhba pipeline to some landlocked countries in Central Europe.
In addition to maintaining some European markets, Russia may sell some of the oil that was previously linked to Europe, China, India and other Asian customers, although it will have to offer discounts, said Chris Weifer, chief executive director of the consulting company Macro-Advisory.
“At the moment, this is not very painful from a financial point of view for Russia, because global prices have risen. They are much higher than last year, “he said. “So even Russia, which is offering a discount, means it’s probably selling its oil for about what it sold last year.
He noted that “India has been a willing buyer” and “China certainly wants to buy more oil because both countries are getting big discounts on world market prices.”
However, Moscow has traditionally viewed Europe as a major energy market, making Monday’s decision the most significant effort so far to punish Russia for its war in Ukraine.
“The sanctions have one clear goal: to make Russia end this war and withdraw its troops and reach an agreement with Ukraine for a reasonable and just peace,” said German Chancellor Olaf Scholz.
Ukraine estimates that the ban could cost Russia tens of billions of dollars.
“The oil embargo will speed up the countdown to the collapse of the Russian economy and military machine,” said Foreign Minister Dmitry Kuleba.
Ukrainian 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 the free world and the terrorist state.”
Simone Taliapietra, an energy expert and research associate at the Brussels-based Bruegel think tank, called the embargo a “serious blow”.
Matteo Villa, an analyst at the ISPI think tank in Milan, said Russia would suffer a significant blow now, but warned that the move could have the opposite effect in the end.
“The risk is that the price of oil as a whole 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 is taking advantage of the new sanctions to try to garner public support against the West, describing it as aimed at destroying Russia.
Dmitry Medvedev, Russia’s deputy head of the Security Council and former president, said the oil ban was aimed at cutting the country’s export earnings and forcing the government to cut social benefits.
“They all hate us!” This was said by Medvedev in his channel in the messaging application. “These decisions stem from hatred against Russia and its entire people.
Russia has not shied away from retaining energy to make 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 cutting off supplies to Shell Energy Europe that have been directed to Germany. Germany has other suppliers, and GasTerra and Oersted have said they are prepared to shut down.
Gazprom previously stopped the flow to Bulgaria, Poland and Finland.
The EU, meanwhile, is urging other countries to avoid barriers to trade in agricultural products, as Russia’s war increases the risks of a global food crisis.
Zelensky said Russia had prevented the export of 22 million tonnes of Ukrainian grain, much of which was destined for people in the Middle East and Africa. He accused Moscow of “deliberately creating this problem”.
Russian offshore oil accounts for two-thirds of Moscow’s oil imports from the EU. In addition to suspending these imports from the EU, Germany and Poland have agreed to stop using oil from the northern branch of the Druzhba pipeline.
The agreement on sanctions against Russian natural gas is likely to be much stricter because it represents a larger percentage of Europe’s energy mix.
“The very strong and clear message that Moscow will hear is that it will be almost impossible for the European Union to reach an agreement to block gas, because gas will not be as easily copied from other sources in Europe as oil,” Weafer said. . .
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Associated Press journalists Juras Karmanau from 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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