Wednesday

30th Nov 2022

Calls for less talk, more action, on Russian oil embargo

  • Oil and gas alone account for about 60 percent of Russian exports (Photo: joiseyshowaa)
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The cost of oil and gas has jumped sharply as talks over boycotting energy from Russia gain momentum.

That has led some experts to warn that talk without actual action simply generates bumper revenues from skyrocketing energy prices — to Moscow's benefit.

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As the war in Ukraine continues to unfold, the US and the EU are discussing a possible embargo on Russian oil, as part of a wider package of economic sanctions against the Kremlin.

Lithuanian foreign minister Gabrielius Landsbergis on Monday (7 March) called for a full embargo on Russian energy sales, pointing out that the EU is partly financing the war in Ukraine by importing significant amounts of coal, gas and oil from Russia.

"We cannot pay for oil and gas with Ukrainian blood," he said.

Landsbergis' comments followed a similar call from Ukrainian president Volodymyr Zelensky also on Monday.

In a video address, Zelensky said the West must respond to Russia's actions with further economic sanctions that explicitly target Russian oil and petroleum products.

And at a meeting in Brussels on Monday, the Polish ambassador to the EU, Andrzej Sadoś, voiced support for a ban on imports of coal, oil and petroleum products, with gas to be banned at a later stage, according to Polish reports.

But for his part, German chancellor Olaf Scholz said Monday that sanctions should not target Russian energy imports, since they are essential for Europe.

"Europe's supply with energy for heating, for mobility, power supply and for industry cannot at the moment be secured otherwise," Scholz said in a statement.

Scholz's intervention is another sign that though some countries have shown an appetite for a full ban on Russian energy exports — including natural gas — others fear such sanctions could hurt the EU because of its continued need for Russian fuels.

So far, an embargo on Russian oil seems more likely than a full ban due to Europe's high reliance on Russian gas.

The EU imports 40 percent of its natural gas and 25 percent of its oil from Russia. Those two commodities alone account for about 60 percent of Russian exports.

Nikos Tsafos, an energy analyst at the Center for Strategic and International Studies, said sanctions on Russian oil would make more sense, since "oil is a bigger moneymaker for Russia than gas".

"If you want to choke funding, oil trumps gas," he wrote on Twitter.

But energy expert Simone Tagliapietra from the Brussels-based think tank Bruegel cautioned leaders against talking about an embargo without making it a reality.

The talk is "a huge gift to Putin," he said, explaining that the current situation was triggering price surges on highly- speculative energy markets and thereby generating further revenues yet more money for the Kremlin.

Insufficient LNG infrastructure

With the conflict in Ukraine again exposing the vulnerabilities of European energy supplies, the 27-nation bloc is vowing to redouble efforts to diversify its sources in order to reduce imports of Russian fossil fuels.

A package of fresh proposals is expected later this week from energy commission Kadri Simson, but the capacity to diversify supplies in the short term is limited.

LNG imports from the US and Qatar have been identified as an alternative to Russian gas.

But the EU lacked sufficient infrastructure and capacity to receive the LNG and then distribute it across Europe, said an EU diplomat, speaking on condition of anonymity.

Meanwhile, more than 450 environmental and civil society organisations have called on the EU, the US, Canada, China, India, Japan, South Korea and others to ban all energy imports from Russia.

The organisations said that countries should avoid replacing Russian fossil fuels with yet more fossil fuels, and in particular LNG, from other countries.

EU energy ministers clash amid gas price uncertainty

EU energy ministers met on Thursday to debate spiking gas and electricity prices, and clashed over market reform - with some countries, led by Germany, opposing actions put forward by France and others.

Analysis

What the Russia conflict might mean for gas prices

In the worst-case scenario gas suppliers wouldn't be able to rebuild their inventories over the summer, industries would have to shut down, and energy rationing may be inevitable.

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