Today, Monday, the European Union announced a ban on the import of Russian oil by sea. This measure is part of the sixth set of sanctions directed against Moscow. The ban on shipments by tankers does not apply to oil transported through the Druzhba pipeline, whose branches pass through Russia, Ukraine and Belarus and serves Central and Eastern Europe.
Hungary, Slovakia and the Czech Republic, which are landlocked countries, rely heavily on deliveries from the Druzhba pipeline. Hungary, for example, gets 65 percent of its oil from this pipeline and has refused to agree to the blanket ban demanded by other EU countries.
About two-thirds of Russia’s oil supplies come from Europe by ship, but EU officials say that by the end of the year they will be able to block 90 percent of imports, after Germany and Poland pledged not to use the pipeline anymore. Bloomberg estimates that the ban will cost Russia $22 billion. Some Russian sources of this view. Others say its effect will be nil, as Moscow will find other buyers.
In the agreement reached at the European summit on May 30-31, no deadline was set for ending European purchases of Russian oil from the Druzhba pipeline. EU officials have made clear that they do not intend to stop at 90 per cent, that they are seeking a 100 per cent ban and will try to wrest it from Hungary, Slovakia and the Czech Republic in the coming months. Referring to the exemption granted to these three countries, European Commission President Ursula von der Leyen said on Monday: “This is something we will come back to and still have to work on.”
The ban, even if it has not yet been officially ratified, will intensify the financial pressure on Russia and cause prices to explode, in Europe and elsewhere. It is the working class that will bear the cost.
On the same day the oil embargo was announced, we learned that in May, inflation in Europe reached 8.1 percent, much higher than expected. In many countries, it is one and a half times higher than the continental average, as in Estonia (20 percent), Lithuania (18.5 percent), Latvia (16.4 percent) and Poland (13.9 percent). In the UK, it is expected to reach 10 per cent. Everywhere, food and fuel are the main drivers of increase.
Russian oil accounts for 30 percent of Europe’s total supply, and its removal has caused tension within the European Union. In Hungary, the conversion of refineries to handle non-Russian supplies would cost 500-700 million euros. Prime Minister Viktor Orban tried to assuage people’s fears in a video posted on Facebook, saying: “We succeeded in defeating the European Council proposal that would have denied Hungary the use of Russian oil.”
Press accounts of the “temporary” exemption granted to the three Central European countries point to fears among the European elite that these countries will now gain a significant advantage over other EU members because they will have access to Russian oil currently sold at deeply discounted prices. The rest of the European Union will have to buy from the world market as prices rise significantly.
The global price of Brent rose to $123.48 a barrel after the ban was announced, and it may rise further. Oil prices have risen in West Africa and Azerbaijan as countries scramble to find new sources.
The financial times Reports suggest that if Hungary, the Czech Republic and Slovakia refuse to meet a deadline to stop their supplies from the Druzhba pipeline, European Commission officials are considering imposing tariffs on Russian oil until these countries pay more. This measure would not require a unanimous vote within the EU, so the objections of Orbán and others could be circumvented. However, this would lead to intense inter-European conflicts.
As EU negotiations approach the latest round of sanctions, Ukrainian President Volodymyr Zelensky, the CIA man in Kyiv, has expressed frustration that he and US “second-tier” countries have been able to mitigate Russia’s financial punishment. Of course, I am grateful to our friends who implement new sanctions. But where did those blocking the sixth round of sanctions get so much power? Why are they still allowed to have all this power, including in European actions?
A BBC article outlines EU plans to deal with the current Russian oil shutdown, as well as a possible future gas cut. These include improving the insulation of buildings; Promote green energy. Getting more oil from Egypt, Israel and Nigeria. Build pipelines and LNG stations and encourage consumers to reduce consumption.
However, implementing these measures will take years, with the possible exception of lower private consumption. This can be done quickly but only by increasing the cost of fuel to the point of crushing ordinary people who simply cannot put gas in their car, turn on the heater or turn on the stove. In other words, this can only be done by provoking a large-scale social conflict.
In an article published on May 31 in the newspaper Wall Street MagazineIt states: “In normal times, consumer behavior is difficult to change, but precedents exist for collective action in times of national emergency. European families, saddled with high energy bills and traumatized by the war in Ukraine, can prove surprisingly fertile ground.” The paper goes on to cite “Victory Gardens,” which helped preserve the United States in World War II, as an approach the European Union needs to consider. When millions of war-loving European families discover oil wells in their backyards, there is no doubt that The Wall Street JournalYou will make the headlines.
In addition to the ban on transporting Russian oil by sea, the latest round of sanctions bans three additional Russian radio stations and excludes Sberbank, a state-owned bank, from the international financial system Swift. In an effort to thwart Russian efforts to send the oil elsewhere that would otherwise have gone to the European market, insurers are prohibited from issuing or reissuing policies covering Russian oil shipments to other countries. This latest punishment will be implemented in phases over a period of six months as Greece, Cyprus and Malta, major players in global shipping, object to a measure that could cause them huge losses.
Immediately after the ban was announced on Monday, there were calls for new efforts to stifle Russia as the world’s energy producer. Poland’s prime minister said on Tuesday that non-EU countries such as India should be forced to stop buying Russian oil. India, like China and other Asian countries, stepped in to purchase much of the newly available Russian supplies. Their purchases were so huge that Russia, despite being forced to sell its products at below market prices, derives a record income from them. Attempts to prevent Beijing and New Delhi from entering the Russian oil and gas market will have explosive geopolitical and economic consequences.
Some EU members are also calling for a ban on Russian gas, which accounts for 40 percent of Europe’s total supply. On Tuesday, Estonian Prime Minister Kaja Kallas pushed for the measure to be included in the next round of sanctions, although Austrian Chancellor Karl Nahammer immediately dismissed the proposal as unquestionable.
While the Kremlin has yet to say anything publicly in response to the European Union’s embargo on Russian oil, it is retaliating against Brussels. Gazprom on Wednesday halted supplies to Danish gas company Orsted and Shell, which had contracted with a German company to buy 1.2 billion cubic meters of gas. The Russian gas giant has already halted deliveries to the Netherlands, Finland, Bulgaria and Poland. The European Union claims to have the ability to replace about two-thirds of gas supplies from Russia within a year. What will happen in the meantime, as well as for the remaining third, is unclear.
(The article was first published in English on June 1, 2022)