THE HAGUE, The Netherlands (AP) – The European Union has agreed to cut Russian oil imports as part of a tough escalation of the bloc’s sanctions campaign to punish Moscow for its invasion of Ukraine. It is a landmark decision that will hit the Russian treasury in the long run, but could also harm consumers across the European continent.
According to analysts, the move, agreed late Monday at the EU summit in Brussels, comes amid rising energy prices in Europe and could trigger further growth, especially later this year as countries battle for natural gas supplies to heat homes and fire industry.
Hours before U.S. markets opened on Wednesday, U.S. benchmark oil rose $ 1.25 to $ 115.92 a barrel in electronic trading on the New York Mercantile Exchange.
Analysts say that with high oil prices, sanctions are unlikely to hit Russia hard in the near future, but they are depriving Moscow of one of its most important oil consumers – probably for a long time.
WHAT DID THE EU DO?
European Union leaders agreed to cut Russian oil imports by about 90% over the next six months, a drastic move that until a few months ago was considered unthinkable. The bloc of 27 countries relies on Russia for 25% of its oil.
The ban applies to all Russian oil delivered by sea. It provides for a temporary exemption from oil supplied through the Russian Druzhba pipeline to some landlocked Central European countries. Germany and Poland have agreed to stop using oil from the northern branch of the pipeline.
Russian oil supplied by sea accounts for two-thirds of Moscow’s oil imports from Moscow.
WHAT’S ON GAS?
According to the International Energy Agency, Russia has the world’s largest natural gas reserves and is the world’s largest exporter.
But don’t expect the leaders of the 27 countries to sign a ban on Russian gas imports any time soon. The unit imports 40% of the gas used for everything from electricity production to home heating, from Russia, and finding alternative supplies is more difficult than for oil.
“It is much easier to compensate for Russian oil – the gas is completely different, so the gas embargo will not be included in the next package of sanctions,” said Austrian Chancellor Karl Nechamer.
This does not mean that gas is safe from geopolitical tensions. Russia is building up its economic musculature and, in response to other sanctions, is suspending or restricting gas supplies to some European countries.
Russian state energy giant Gazprom said this week that it was cutting off gas supplies to Dutch trader GasTerra and Danish company Oersted, as well as cutting off supplies to Shell Energy Europe heading to Germany. There are other suppliers in Germany, and GasTerra and Oersted have said they are ready to shut down. Earlier, Gazprom stopped the flow to Bulgaria, Poland and Finland.
“Who’s next?” said Lucia van Gins, an energy expert from The Hague Center for Security Studies. She said the tightening of Moscow’s network could force EU countries to compete for gas supplies from other sources to replenish storage facilities over the summer and use next winter – a move that is likely to raise prices even further.
WHAT DOES THIS MEAN FOR SPORATIONS?
In short: higher prices. Concerned about the devastating war in Ukraine and steps to punish Russia for invading its neighbor, energy bills and gasoline prices have been high for months, and governments have cut taxes in an effort to spare their citizens.
Despite this, energy consumers – basically anyone who flips a switch, takes a shower, looks at a phone screen or fills the fuel tank of their car – are experiencing difficulty and looking for ways to cut costs wherever they can.
While oil prices rose again on Wednesday, motorists in the eastern Netherlands crossed the border en masse to refuel in neighboring Germany, where government tax cuts have made a liter of petrol much cheaper than in the Netherlands. The Dutch TV company NOS showed queues of cars with Dutch license plates waiting near German gasoline sellers.
WHAT DOES THIS MEAN FOR RUSSIA?
Moscow is waging an extremely expensive war in Ukraine. Oil and gas exports largely provide the bill. Last year, they accounted for 45% of the federal budget, according to the International Energy Agency.
Europe is Russia’s main consumer of energy, and once 27 countries cut off supplies, they may not return.
In the short term, the oil ban is unlikely to do much harm to Russia amid high oil prices, which means Moscow can sell at a discount to customers in Asia while making a profit, said Chris Weafer, CEO of consulting firm Macro. Advisory Ltd. . “Financial pain for Russia is likely to arise more next year or over the next few years if it will still offer discounts,” Weafer told the AP.
Van Gins said Moscow’s decision to cut off gas to European consumers is also likely to hurt Russia in the long run, “because they will lose a large customer, and of course Europe is their biggest customer when it comes to gas.”
IS IT AFTER THE TRANSITION TO RENEWABLE SOURCES?
In the long run, probably, but in the short run it can have the opposite effect. Some lawmakers in the Netherlands have already voiced support for increased production at the rest of the country’s coal-fired power plants, which are gradually stopping in an effort to curb carbon emissions so that consumption by gas-fired power plants can be reduced.
Mads Flaup Christensen, secretary general of Greenpeace Norden, called on the EU to mitigate the effects of oil sanctions by using less oil.
“If the ban is to have the maximum impact on Putin’s war and the climate crisis, then we need to cut our oil consumption immediately,” Christensen said. “This will require changes in the way we travel, such as a ban on short routes, reduced speeds on motorways and cheaper public transport.”
Follow the coverage of the war in Ukraine in the AP at https://apnews.com/hub/russia-ukraine