The European Union has agreed to ban the import of oil from Russia, a major shift for the bloc, which has long depended on the country for its fossil-fuel supply.
European Council president Charles Michel first announced the embargo on Monday via Twitter, stating that Russian oil would stop flowing into the E.U. by the end of 2022, when most contracts with Russian petroleum companies expire. He said that it would cut “a huge source of financing for [Russia’s] war machine.”
The export of oil and gas makes up around 40 percent of Russia’s budget revenue and 60 percent of all exports, figures which have likely increased as Russia’s other exports face widespread sanctions following the invasion of Ukraine.
Agreement to ban export of Russian oil to the EU.
This immediately covers more than 2/3 of oil imports from Russia, cutting a huge source of financing for its war machine.
Maximum pressure on Russia to end the war.
— Charles Michel (@eucopresident) May 30, 2022
The decision is equally significant for the EU, which relies on Russia for 27 percent of its oil imports and 40 percent of all-natural gas use, earning Russian companies upwards of $430 billion a year.
Previously, the bloc had been reluctant to sanction Russia’s petroleum sector, fearing higher oil prices that would add to inflation. Additionally, the absence of short-term supply in alternative markets (in the Middle East and North Sea) along with the lack of transportation infrastructure raised concerns that a ban on Russian fuels would be crippling for Europe. Hungary, whose prime minister, Viktor Orbán, has maintained close relations with Russia, was among the opponents of a blanket ban, citing these reasons.
The EU appears to have resolved those concerns with its deal, a compromise between both positions. Its terms prohibit the importation of Russian oil and gas by sea but not by pipeline. This would allow Central European countries Hungary, Slovakia, and the Czech Republic to temporarily continue importing Russian oil through the Druzhba pipeline, lacking access to alternative sources, while outright banning two-thirds of Russian oil exports. With Poland and Germany’s recent announcements to end Russian pipeline imports, effectively 93 percent of Russian imports would be halted by 2023.
The announcement prompted a spike in oil prices to $123 per barrel of Brent crude, the industry standard — the highest level in over two months.
In a statement, European Commission President Ursula von der Leyen said that deal had been agreed to “in principle,” with language yet to be worked out. She added that the exemption for the three countries would be “revisited as soon as possible.”
The EU’s decision is expected to produce a windfall for the U.S. oil and gas industry, which is the third-largest supplier to the bloc after Russia and Norway.
In March, President Joe Biden had announced a deal with von der Leyen to increase supplies of U.S. natural gas to Europe by 15 billion cubic meters in 2022, a 10 percent increase in current export levels. Speaking to the New York Times, Charif Souki, the executive chairman of Tellurian, said of the decision: “I have no idea how they are going to do this, but I don’t want to criticize them, because for the first time they are trying to do the right thing.”