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Explainer-EU’s options to cut Russian oil imports


© Reuters. FILE PHOTO – A worker inspects the oil pipeline at Imilorskoye, a Lukoil oil company, outside of the West Siberian town of Kogalym (Russia), January 25, 2016. REUTERS/Sergei Karpukhin/File Photo

Francesco Guarascio & Kate Abnett

BRUSSELS, (Reuters) – The European Union has begun to look at options for cutting Russian oil imports as part of any further sanctions against Moscow following its invasion of Ukraine. However, no formal proposal has yet been made as countries assess the impact.

About half of Russia’s estimated 4.7million barrels per day crude oil exports to Europe go there. Moscow could lose an important revenue stream by cutting them off.

Since the beginning of the operation, which Moscow refers to as a special military one in Ukraine, two months ago Europe has spent 14 billion euros (or $14.94 billion) for oil. This is according the Centre for Research on Energy and Clean Air.

The EU would be also subject to sanctions, since Russia, which supplies 26% of Europe’s oil imports for 2020, is Europe’s largest oil supplier. Russia’s largest buyers are Germany, Poland, the Netherlands and Poland.


A ban on oil imports would be the most effective way to sanction Moscow, similar to the EU embargo on Russian coal.

The EU government has yet to come up with a consensus on the key elements of this move. This includes when it would be effective, what time it would last for existing contracts and whether it would cover all kinds of Russian oil.

Germany, Europe’s most populous economy, stated it was working to stop Russian oil imports by the end this year. It would also delay any impact it may have on Russia’s current military operations.

In contrast, imposition of such sanctions too soon could be a blow to the European economic system and could lead to a drop in revenues from Russia due to higher oil prices.

In an effort to reduce the EU’s negative impacts, the EU is trying to locate alternative suppliers that are more affordable.

You could choose to gradually reduce imports from Russia without banning them all.

According to JPMorgan (NYSE):, 60% of Russian crude oil exports to Europe in 2013 were made under long-term contracts. This is different from purchases on the spot market which can be more difficult to cut.

An EU source said that sanctions could be different depending on the way oil is transported. This includes oil imports via tankers and pipelines.


Valdis Dombrovskis EU trade Commissioner stated that imposing tariffs on Russian Oil would help cut EU imports.

According to Simone Tagliapietra (senior researcher at Bruegel in Brussels), this would make Russia lower its pre-tariffs oil price to maintain its competitiveness, thereby reducing Russia’s revenues.

However, the measure may also increase fuel prices in Europe, which has seen record-breaking inflation due to high energy prices.

The same negative and positive effects would also be caused by a tax on Russian crude oil, but it would be paid by EU customers directly, not Moscow.

Other measures taken to curb Russian oil imports might have inflationary impacts, however tariffs or taxes could cause some price rises.

Russia might also take further measures against the EU in retaliation, leading to higher oil prices.


EU members could set limits on how much they will pay Moscow to get oil.

If EU countries stopped buying Russian oil at the set threshold, it would be within existing oil contract provisions.

The EU could face increased energy costs or slowdown if it does not have sufficient, moderately-priced alternatives.

These could be used by eurosceptic parties to exploit this situation, which is a risk for France’s political system ahead of June’s legislative elections.

Additionally, the measure will blurring price signals which could increase inflationary risks.


Kaja Kallas (Estonian Prime Minister) has requested that an account be opened in which some EU payments for Moscow’s energy imports be temporarily held.

Russia was unable to access the money until a later time or for a set amount, like for equipment for hospitals or payments for rebuilding damaged Ukrainian cities.

This could reduce EU payments and imports to Russia.

But, this could mean that it is in violation of oil agreements. It could put the EU into a legal bind and lead Moscow to decide to block or decrease energy exports from the EU.

Alternativly, money could be deposited into the account to pay tariffs and taxes related to Russian oil. This would not violate contracts. This would, however, not be considered a new measure. It is a tool for generating revenue from existing measures.

($1 = 0.9371 euros)