Europe turns its back on Russian coal. Is oil next?

All forms of Russian coal will be banned from the European Union, a move the European Commission said on Friday would affect about 8 billion euros ($8.7 billion) in Russian exports per year. Europe plans to reduce imports in the next four months, an EU source he told CNN Business.

It is the first time that Europe has gone after Russia’s vast energy sector, but it is not going far enough for Ukraine, which on Friday repeated its call for an oil embargo after a missile attack on a rail terminal in Kramatorsk, Ukraine, which it killed about 30 people and injured hundreds, according to President Volodymyr Zelensky.

“How much longer can Europe ignore the introduction of an embargo against Russian oil supplies?” Zelensky said.

The European Commission says that around 45% of the bloc’s natural gas imports, and around 25% of its oil imports, come from from Russia. The European Union has imported some 35 billion euros ($38 billion) worth of Russian energy since the war began.

Coal has always been the easiest target: Europe imports almost half of its coal from Russia, but demand for the world’s dirtiest fossil fuel was already falling. and alternative supplies are more readily available than for natural gas.

However, the shocking reports from Bucha and Kramatorsk have increased pressure on EU leaders to also consider banning or restricting oil imports from Russia.

How likely is an oil ban?

Russia is the world’s second-largest exporter of crude oil, behind Saudi Arabia, and accounted for 14% of global supply last year, according to the International Energy Agency. Nearly two-thirds of its exports went to Europe before Russia invaded Ukraine.

In March, Europe set a 2027 deadline for shelving Russian oil and gas. But an oil embargo that begins much earlier is now firmly on the table. European Commission President Ursula von der Leyen told the European Parliament on Wednesday that the fifth package of sanctions “will not be [its] latest.”

“Yes, now we have banned coal, but now we have to investigate oil,” he added.

French President Emmanuel Macron was one of the first leaders to openly support a complete ban on Russian oil. Speaking to a French broadcaster on Monday, Macron said there were “very clear signs” that war crimes had been committed in Bucha and that Europe “I can’t let it go.”

On Friday, French Finance Minister Bruno Le Maire told CNN that France did not want to wait to ban Russian oil after seeing the rail attack earlier that day.

“As far as France is concerned, we are ready to go further and decide on an oil ban and I am deeply convinced that the next steps and the next discussions will focus on this issue of the Russian oil ban,” he said.

More details of the oil sanctions could come as soon as Monday, when EU foreign ministers meet for talks. Options on the table include taxing oil imports and forcing buyers to pay into an escrow account that Russia could only use under certain conditions.

Getting all EU member states to agree can be tricky. Dependence on Russian oil varies widely across the European Union. Hungary is particularly exposed, and Viktor Orban, the country’s newly re-elected prime minister and a longtime ally of President Vladimir Putin, could scupper any proposal.

“While we condemn Russia’s armed offensive and also condemn the war, we will not allow Hungarian families to pay the price of the war,” Orban said in a statement in early March.

“Sanctions should not be extended to oil and gas areas,” he added.

Could Europe cope?

While sanctions on Russian natural gas are unlikely at this point due to the economic damage they would cause, Europe might be better able to withstand an embargo on Russian oil.

The US, UK, Canada and Australia have announced bans on Russian oil, and a broader de facto embargo is already in place as banks, traders, shippers and insurance companies try to avoid incurring financial penalties. .

European oil companies, including Shell, TotalEnergies and Neste have stopped buying Russian crude, or will do so later this year.

The price of Brent crude, the global benchmark, soared in early March to briefly exceed $139 a barrel, a 14-year high, but has since fallen back to trade around $100 a barrel. And Russia’s Urals-grade crude is trading around $34 a barrel below that, a record discount.
In recent days, rich countries have promised to exploit their oil reserves to help lower prices and offset a reduction in Russian supplies. In March, the United States announced that it would release 180 million barrels. IEA member countries followed suit, adding another 60 million barrels to world stocks.

Claudio Galimberti, Vice President of Analysis at Rystad Energy, he said the impact of an EU oil embargo on Russia would depend on the extent to which it could divert exports to Asia.

“As long as it manages to divert most of its oil exports from Europe to Asia, the impact could be, relatively speaking, not massive. Otherwise, it would completely cripple the Russian economy, as it relies heavily on oil exports. oil,” he said. CNN business.

While Europe accounts for more than half of Russia’s oil exports, China is the largest individual buyer, accounting for around 20%, according to the IEA.

CNN’s Chris Liakos, Niamh Kennedy, Mark Thompson, Emmet Lyons and Sugam Pokharel contributed to this report.

Leave a Comment