European Commission President Ursula von der Leyen announced a proposal for the European Union this week impose a gradual embargo on Russian oil as part of its toughest sanctions package ever. The biggest obstacle to such a move? The bloc has yet to agree when and how such controls will be instituted, not only signaling the disunity in the bloc’s response to the invasion of Ukraine, but also potentially mitigating the economic blow provided by the embargo, at least in the short term.
Von der Leyen, head of the EU’s legislative arm, announced the plan as part of a broader sanctions package, which includes banning Russian propaganda media in the EU, imposing individual sanctions on generals Russians involved in the Bucha massacre and the siege of Mariupol in Ukraine and the removal of three banks, including SberBank, Russia’s largest, from the SWIFT payment system. EU member countries such as Germany previously it resisted the call to cut Russian oil, citing the damage it could have on its economies; von der Leyen addressed these concerns, saying: “Let’s be clear: it won’t be easy. Some Member States are heavily dependent on Russian oil. But we just have to work on it. ”
Von der Leyen further explained that the embargo will apply to “all Russian oil, sea and pipeline, crude and refined” and that the EU will eliminate its dependence on Russian oil “in an orderly fashion” from “[phasing] Russian crude oil supply within six months and refined products by the end of the year. “But shortly after the announcement, Hungary, the Czech Republic and Slovakia agreed worries that they would not have enough time to abandon Russian oil before their extended deadlines, which would have devastated their economies. Hungary, whose boss Victor Orban he maintained ties with Russian President Vladimir Putin, threatening to reject the EU sanctions package if Hungary is not allowed to continue importing Russian crude via pipelines. As the EU proposals require the unanimity of all member states to be enacted, Hungary’s veto would nullify the whole package.
And Greece, Malta and Cyprus raised their own issues, Reuters reported on Friday. These nations have the largest maritime fleets in the EU; they raised concerns about the effect the embargo would have on their shipping industries. The Greek oil tankers in particular shipped about half of all Russian oil exports in the weeks following the invasion.
“We are against the Russian invasion and obviously in favor of sanctions. But these sanctions should be targeted and not selective in serving some member states and leaving others uncovered, ”Cyprus President Nicos Anastasiades said at a press conference.
From this weekend, negotiations are underway to overturn a sanctions package that meets the needs of all member countries, but it is unclear when the bloc will agree on a final deal and why von der Leyen announced the package before all states agreed.
Vox made several attempts to contact the European Commission for comment on the state of the negotiations, but received no response by press time.
This is the sixth EU sanctions package, and the most complicated so far
As von der Leyen said, this is the most significant and complex sanctions package the EC is ready to impose on Russia for its invasion of Ukraine. This means engaging in difficult negotiations and balancing conflicting needs and priorities.
After the Russian invasion of Ukraine on February 24, “there were requests for an embargo almost immediately,” Thane Gustafson, professor of political science at Georgetown University and author of the book Klimat: Russia in the era of climate change, he told Vox on Saturday. “It took a while to put things on the drawing board.” Given the challenge of engaging all 27 member states with an oil embargo, Wednesday’s announcement came fairly quickly; but that also indicates that EC members and leadership are “playing by ear,” said Gustafson, hence protests from Hungary, the Czech Republic, Slovakia and others.
Those nations have no energy alternatives to support their economies at the moment, which is why Hungary and Slovakia were initially offered an extra year, until the end of 2023, to comply with the embargo. Hungary has requested an exemption from importing crude oil via pipeline and Slovakia and the Czech Republic are discussing longer transition periods, according to the Financial Times. Although the details are still under discussion, reporting by Reuters on Friday indicated that the EC will extend the timeframe for those countries to wean themselves off Russian oil and provide assistance for refinery modernization.
“The key thing is to bring the Hungarians on board,” said Gustafson. “There will be bargaining both ways,” he told Vox. This is due to the principle of EC unanimity, not because Hungary – or, for that matter, Slovakia or the Czech Republic – consume enough Russian oil for their participation in the ban to matter economically, as Hungarian imports and Slovaks account for only around 6% of the EU’s Russian oil imports, according to Reuters.
Will these sanctions affect the Russian economy?
While Gustafson believes there will be a decision on the oil embargo, “in the short term, it will be a cushioned blow.” For one thing, there are still nations that will buy Russian oil in the short term, although eventually, Gustafson told Vox, Russia will run out of capacity to ship or store enough oil to make up for losses from the EU embargo. thus forcing the industry to slow down production, resulting in lower prices.
But second the Wednesday groupwhich tracks Russian oil exports, rising fuel prices have caused Russia to be cashing in on sales as much as soon as possible The US decision to ban Russian oil imports in March. Though the EU is the largest Russian oil importerthe staggered transition timeline proposed by the EC could potentially give Russia more time negotiate exports to other nations; is already happening with India, The Washington Post reports,
The proposed ban is a major change from EU policy just two months ago, when the bloc refused to join the US total embargo on Russian energy products. At the time, the block unveiled a plan for reduce dependence on natural gas by two thirds by the end of this year; Wednesday’s announcement didn’t address that commitment or natural gas issue at all.
The question of natural gas is certainly complex and Russia has been able to arm the resource, interrupting the flows to Poland and Bulgaria for their refusal to buy it with rubles last month. Part of the problem, Gustafson explained, is that natural gas exports are regulated by long-term contracts who can use “take or pay” clauses – as in a country either takes the product or pays a specific amount even if it does not take the gas. Closing access, therefore, is not just a question of refusing to purchase the goods. Finding an alternative source for natural gas is also not that simple. The infrastructure to replace natural gas imports from Russia with imports from other countries such as the United States it does not yet exist at the necessary scale – and increased production and use could seriously undermine climate targets.
Additionally, Russia’s natural gas exports – both shipments as liquefied natural gas and via pipelines like the now sunk Nord Stream 2 – have actually increased since the war, according to the Research center on energy and clean air.
But “the biggest question is Germany,” said Gustafson. The EU’s largest economy, Germany, relies heavily on Russian natural gas to heat homes and fuel its economy; dismantling that infrastructure without triggering a recession with far-reaching effects is going to be a tricky deal indeed. Germany developed “very elaborate” partnerships with Russia a long time ago, Gustafson noted, particularly after the fall of the Soviet Union. That was the thought of Germany such economic interdependence would guarantee peace in Europe, which The Daily explained in an episode last month. The invasion of Ukraine canceled decades of peace and Germany’s energy transition will have to cancel decades of cooperation and dependence on Russian sources.
Whether and when the EC unanimously decides on a path to take to free EU member countries from dependence on Russian fuel, it is unclear what the desired effect of an oil or fuel embargo would be. Theoretically, the goal of cutting profits from the Russian fuel industry is to stop Putin’s war machine by bleeding the Russian economy. However, it may take a long time for the EU embargo to have such a significant effect.
Even Wednesday’s announcement does not appear to have altered Putin’s point of view. The Kremlin’s response to the embargo proposal was in line with its attitude towards Western involvement in the war, Gustafson told Vox: “The dominant response, and certainly the public response, is the challenge and the challenge towards West”.