The EU has imposed an oil embargo on Russia - but other countries are in a hurry to make up for the shortfall

According to experts, the Russian oil production industry has already proven that it is durable and may not hurt significantly, mainly due to the fact that India and China have not stopped purchasing oil from Russia and even increased it - despite the criticism

Tali Goldstein

31/05/2022

Tuesday, 31 May 2022, 12:07 Updated: 14:24

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In video: EU president announces agreement on Russian oil embargo (Photo: Reuters)

The EU agreed (Tuesday) on a partial embargo on Russian oil after talks that continued into the night at the summit of the leaders of the member states of the organization in Brussels.

Union President Charles Michelle welcomed the agreement, saying it was an "extraordinary achievement", after tweeting last night that sanctions would immediately affect 75% of Russian oil imports, "which would significantly hurt Russia's war machine funding source."

Ursula von der Lane, the president of the European Union, said the boycott would "cut 90% of Russian oil imports into the union by the end of the year" because Germany and Poland had pledged to give up supplies through an oil pipeline to their territory.

She said the union had agreed to a "massive investment in renewable energy" to compensate for the halt in imports of Russian oil.

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The EU imposed a partial oil embargo on Russia

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EU leaders summit in Brussels, 30 May 2022 (Photo: AP)

Looking for new customers for its oil.

Russian President Vladimir Putin (Photo: AP)

Moscow has responded to the news with a commitment to find other importers of its oil.

Mikhail Olinov, Russia's permanent representative to international organizations in Vienna, Austria, said the oil embargo illuminated the EU in a negative light.

About 36% of the Union's oil imports come from Russia, the third largest oil producer in the world, after the United States and Saudi Arabia - and the largest exporter of crude oil to global markets.

At the summit, which began yesterday and is expected to end today, union leaders tried to find a way to appease Hungarian Prime Minister Victor Urban, who opposed an agreement on a six-nation sanctions package.

Thus, we discussed at the summit a plan that is in fact a compromise, under which Russian oil supplied through the Druze pipeline would continue to reach Hungary, the Czech Republic and Slovakia despite the embargo.

Upon reaching the summit, Urban said that "the pipeline solution is not bad" but insisted that his country needs guarantees that it could get oil from other sources, should there be a malfunction in the pipeline passing through Ukraine.

Entering the fourth month of the war in Ukraine, Russian attack damage in Ukraine (Photo: Reuters)

According to officials involved in the talks, the fact that Germany and Poland have pledged to gradually stop using Russian oil by the end of the year leads to the oil embargo covering 93% of Russian oil supplies by the end of 2022. Moreover, the United States, Canada, Britain and Australia have already banned imports Russian oil, and Japan announced it would join the boycott, at the 7G summit earlier this month.

"Oil is a major source of cash for Russia, and since the imposition of financial sanctions on it, oil has become a lifeline for the Russian economy and a necessary source of funding for the war in Ukraine," experts from the Ruigel Research Institute wrote.

China continues to buy Russian oil.

Chinese and Russian presidents meet, 2019 (Photo: AP)

However, some argue that while the oil embargo will indeed hurt Russian exports - a cornerstone of the Russian economy - the Russian oil manufacturing industry has already proven to be resilient and may not hurt significantly until sanctions take effect.

This is because European and other customers, such as India, are now taking the opportunity to buy crude oil at a discount - $ 30 per barrel of Brent crude oil.

India, the third largest oil importer in the world, has recently increased its oil imports from Russia, according to Reuters.

The third largest economy in the world dismissed criticism against the continued purchase of Russian oil even after the invasion of Ukraine, saying that a sudden halt to imports would hurt consumers.

China also supports Russia and secretly increases Russian oil purchases at a significant discount, Reuters reported.

It seems that the world's largest importer of oil is happy to fill the vacuum created by the departure of Western customers and the severance of ties with Russia due to Ukraine.

Summit of Presidents of Brazil, Russia, China, India and South Africa in Brazil (Photo: Reuters)

According to data from the research company in the field of commodities Kpler, Russian oil production actually increased by about 200,000 barrels a day in May, to 10.2 million barrels a day, compared to April.

The company estimates that the embargo will cause a further drop in oil production of about one million barrels of oil per day, or 10%, once the sanctions take effect.

This decline, according to analysts, will hurt the Russian energy industry in the long run, against the backdrop of foreign oil companies leaving the country and sanctions on imports of Western technologies.

Gas - the next issue on the negotiating table.

Russian gas company Gazprom (Photo: Reuters, REUTERS / Maxim Shemetov)

Now on the agenda is Russian natural gas.

Russia is also the world's largest producer and exporter of natural gas.

Some EU leaders have already begun discussing a seventh package of sanctions on Russian gas.

Russia has already cut off natural gas supplies to the Netherlands, Poland, Finland and Bulgaria, because they have not agreed to pay in rubles instead of euros or dollars - at Russia's request.

Russian natural gas accounted for 45% of imports and about 40% of EU demand in 2021.

This share is growing due to the decline in natural gas production in Europe.

Germany, Turkey and Italy are the largest importers of Russian natural gas.

In addition, Russia is increasing its natural gas production to compete with growing exports from the United States, Australia and Qatar.

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