BRUSSELS – The European Union’s groundbreaking decision to ban nearly all oil from Russia to punish the country for its invasion of Ukraine is a blow to Moscow’s economy, but its effects may be blunted by rising energy prices and other countries willing to buy some of the petroleum, industry experts say.
European Union leaders agreed late Monday 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-country bloc relies on Russia for 25% of its oil and 40% of its natural gas, and European countries that are even more heavily dependent on Russia had been especially reluctant to act.
European heads of state hailed the decision as a watershed, but analysts were more circumspect.
The EU ban applies to all Russian oil delivered by sea.
At Hungary’s insistence, it contains a temporary exemption for oil delivered by the Russian Druzhba pipeline to certain landlocked countries in Central Europe.
In addition to retaining some European markets, Russia could sell some of the oil previously bound to Europe to China, India and other customers in Asia, even though it will have to offer discounts, said Chris Weafer, CEO at consulting firm Macro-Advisory.
“Now, for the moment, that’s not financially too painful for Russia because global prices are elevated. They’re much higher than last year,” he said. “So even Russia offering a discount means that it’s probably selling its oil for roughly what it sold for last year also.”
He noted that “India has been a willing buyer” and “China’s certainly been keen to buy more oil because they’re both countries who are getting big discounts on global market prices.”
Still, Moscow has traditionally viewed Europe as its main energy market, making Monday’s decision the most significant effort yet to punish Russia for its war in Ukraine.
“The sanctions have one clear aim: to prompt Russia to end this war and withdraw its troops and to agree with Ukraine on a sensible and fair peace,” German Chancellor Olaf Scholz said.