On May 4th, the EU proposed its harshest sanctions against Russia since the outbreak of the Ukrainian War. In addition to disconnecting three major Russian banks from SWIFT (the Society for Worldwide Interbank Financial Telecommunication), the proposal calls for a total ban on Russian crude oil imports within six months. However, the proposal requires the support of all 27 EU member states and has already sparked fierce debate.
Hungary and Slovakia are the most reluctant to sign on to the increased sanctions. Hungarian spokesman Zoltán Kovács expressed concern about how the transition could be carried out over such a short period of time. “We do not see any plans or guarantees on how a transition could be managed based on the current proposal, and how Hungary’s energy security would be guaranteed,” quoted Al Jazeera. The EU has proposed to give Hungary and Slovakia an extension on phasing out Russian oil, but the nations are still reluctant to commit to total oil independence from Russia.
However, there seems to be little choice but to take even harder measures after months of sanctions have failed to slow down the war in Ukraine. Additionally, there are concerns that continued imports of oil and gas are funding the war in Ukraine. The New Voice of Ukraine reported that Russian revenue from oil and gas exports to Europe exceeded Russia’s military budget by over 7 billion euros in 2021. European Council President Charles Michel declared, “We must break the Russian war machine” by decreasing dependence on Russian oil and gas.
Accounting for 40% of government revenue and 50% of exports, oil is a mainstay of the Russian economy. Prior to the start of the Ukrainian War in February, Europe was by far the largest importer of Russian oil and natural gas. Although Europe has sought to diversify its energy sources the past few months, it still remains heavily reliant on oil and gas imports. A hard sanction against importing oil, and eventually gas, is the most severe economic consequence that Europe can levy against Russia. Several other nations, such as the U.S. and Australia, have already embargoed Russian oil.
However, the consequences will not be immediate. Despite a decline in oil exports, Russia has maintained a steady revenue as a result of major price hikes in the cost of oil. Each barrel of crude oil it can export earns it significantly more. Additionally, China has begun importing more Russian oil. In order for the full economic consequences to hurt the Kremlin, Europe must find ways to lower the global price of oil and find support for sanctions among potential buyers of Russian oil, an extremely difficult task.
Announcement of the proposal immediately led to a 4% price jump in crude oil, according to NPR. European nations have been reluctant to ban Russian oil due to the negative consequences on their own economies and people. To ease this inflationary burden on consumers, Europe will need to increase its import of oil from other countries, such as the U.S., and rapidly develop alternative sources of energy. Some countries, such as Spain and Italy, have also begun subsidizing oil to support consumers who cannot keep up with inflation.
Though a rapid transition away from Russian oil presents a major energy challenge for EU member states, it is a necessary step to continue condemning Russian action in Ukraine and stop financially supporting a brutal war. Decisions over whether or not to adopt the proposal will be decided early next week. At least in the short-run, the proposal will add to the already rampant inflation and present energy risks for EU member states. However, it is hoped that over the next months and years, these actions will cripple the Russian economy and provide a severe punishment for its horrific actions in Ukraine.
- Turkey Stalls Swedish, Finnish N.A.T.O. Memberships Over Kurdish Extremism Concerns - June 8, 2022
- French Nationals Arrested In Iran Amidst Nuclear Deal Talks - June 1, 2022
- EU Proposes To Ban Russian Oil - May 11, 2022