The US banned Russian oil. So, what now?

London (CNN Business)European leaders have agreed to phase out Russian coal imports as part of a new package of sanctions triggered by evidence of atrocities in Bucha, Ukraine. An oil embargo could be next.

All forms of Russian coal will be banned from the European Union, a move that the European Commission said Friday would affect about €8 billion ($8.7 billion) worth of Russian exports per year. Europe plans to wind down imports over the next four months, an EU source told CNN Business.
It is the first time Europe has come after Russia’s vast energy sector, but it doesn’t go nearly far enough for Ukraine, which on Friday repeated its called for an oil embargo after a missile strike on a railway terminal in Kramatorsk, Ukraine, killed about 30 people and injured hundreds, according to President Volodymyr Zelensky.

“How much longer can the Europe ignore the introduction of an embargo against oil supplies from Russia?” Zelensky said.

The European Commission says that about 45% of the bloc’s natural gas imports, and around 25% of its oil imports, come from Russia. The European Union has imported about €35 billion ($38 billion) worth of Russian energy since the war began.

Coal was always the easier target: Europe imports almost half its coal from Russia, but demand for the world’s dirtiest fossil fuel was already waning, and alternative supplies are more readily available than for natural gas.
Yet the shocking reports from Bucha and Kramatorsk has raised the pressure on EU leaders to also consider banning, or restricting, imports of oil from Russia.

How likely is an oil ban?

Russia is the world’s second-largest crude oil exporter, behind Saudi Arabia, and accounted for 14% of global supply last year, according to the International Energy Agency. Nearly two-thirds of its exports went to Europe before Russia invaded Ukraine.
In March, Europe set a deadline of 2027 to wean itself off Russian gas and oil. But an oil embargo that begins much sooner is now firmly on the table. European Commission President Ursula von der Leyen told the European Parliament on Wednesday that the fifth package of sanctions “will not be [its] last.”
“Yes, we’ve now banned coal, but now we have to look into oil,” she added.
French President Emmanuel Macron was one of the first leaders to openly support a total ban on Russian oil. Speaking to a French broadcaster on Monday, Macron said that there were “very clear signs” war crimes had been committed in Bucha and that Europe “can’t let it slide.”
On Friday, French Finance Minister Bruno Le Maire told CNN that France did not want to wait to ban Russian oil after seeing the railway attack earlier in the day.
“As France is concerned we stand ready to go further and to decide a ban on oil and I’m deeply convinced that the next steps and the next discussions will focus on this question of the ban on Russian oil,” he said.
German Chancellor Olaf Scholz said Friday he believes Germany will be able to stop importing Russian oil “this year.” Speaking at a press conference with British Prime Minister Boris Johnson during a visit to London, Scholz said Germany was “actively working” on becoming independent from Russian oil imports but added it would take Germany longer to wean itself off Russian gas.
More details of oil sanctions could come as soon as Monday when EU foreign ministers meet for talks. Options on the table include taxing oil imports and forcing buyers to pay into an escrow account that could only be tapped by Russia under certain conditions.
Getting all EU member states to agree may be tricky. Dependency on Russian oil varies widely across the European Union. Hungary is particularly exposed, and Viktor Orban, the country’s newly reelected prime minister and longtime ally of President Vladimir Putin, could scupper any proposals.
“While we condemn Russia’s armed offensive and we also condemn the war, we will not allow Hungarian families to be made to pay the price of the war,” Orban said in a statement in early March.
“Sanctions must not be extended to the areas of oil and gas,” he added.

Could Europe cope?

While sanctions on Russian natural gas are unlikely at this point because of the economic damage they would cause, Europe could better withstand an embargo on Russian oil.
The United States, United Kingdom, Canada and Australia have all announced bans on Russian oil, and a wider de facto embargo has already taken hold as banks, traders, shippers and insurance companies try to avoid falling foul of financial sanctions.
European oil companies including Shell, TotalEnergies and Neste have stopped buying Russian crude, or will do so by the end of this year.
The price of Brent crude, the global benchmark, soared in early March to briefly pass $139 a barrel — a 14-year high — but has since fallen back down to trade around $100 a barrel. And Russia’s Urals grade crude is trading about $34 a barrel below that, a record discount.
In recent days, rich countries have promised to tap their oil reserves to help bring down prices and counter a reduction in Russian supplies. In March, the United States announced it would release 180 million barrels. IEA member countries followed suit, adding another 60 million barrels to global stocks.
Claudio Galimberti, vice president of analysis at Rystad Energy, said that the impact of an EU oil embargo on Russia would depend on the extent to which it could divert exports to Asia.
“As long as it manages to divert most of its oil exports from Europe to Asia, the impact could be — relatively speaking — not massive. Otherwise, it would completely cripple the Russian economy, as it’s heavily dependent on oil exports,” he told CNN Business.

While Europe accounts for more than half of Russia’s oil exports, China is the largest single buyer, accounting for about 20%, according to the IEA.
— CNN’s Chris Liakos, Niamh Kennedy, Mark Thompson, Emmet Lyons and Sugam Pokharel contributed to this report.
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