“It will not be easy,” said the Commission’s president Ursula von der Leyen, recognising that some Member States are strongly dependent on Russian oil.
“But we simply have to work on it,” she continued. “This will be a complete import ban on all Russian oil, seaborne and pipeline, crude and refined. We will make sure that we phase out Russian oil in an orderly fashion, in a way that allows us and our partners to secure alternative supply routes and minimises the impact on global markets.”
“This is why we will phase out the Russian supply of crude oil within six months and refined products by the end of the year,” she explained. “Thus, we maximise pressure on Russia, while at the same time minimising collateral damage to us and our partners around the globe. Because to help Ukraine, our own economy has to remain strong.”
Independent energy research and business intelligence company Rystad Energy, warned that if the EU enacts an oil embargo on Russia, it could lead to increased volatility and rising crude prices.
“As the EU appears to be moving towards a gradual phase-out of oil imports from Russia, crude prices are rising today,” noted the head of oil markets research, Bjørnar Tonhaugen. “However, the long-term market reaction may be relatively muted, especially if the final embargo law is less severe and wide-ranging than the initial proposal due to the EU’s unanimity rules.”
While the proposal needs yet to be approved by the EU Parliament, Mr Tonhaugen draws the attention to fact that Member States with limited options for replacing the Russian oil supply in the short-term, such as Hungary and Slovakia, might allegedly get an extra year to cut their imports.
“Following a period of lower oil prices, due to COVID-related demand downside in China and the mega-SPR release by the US and IEA in early April, higher prices could be around the corner,” he warned. “The oil market has not fully priced in the potential of an EU oil embargo, so higher crude prices are to be expected in the summer months if it’s voted into law.”
However, he also reminded us that since unanimity is required within the EU, a heavily watered-down version of the initial proposal is more likely, especially given the current stance of Hungary.