Even if an embargo takes effect, Russia may not feel it much in the short term.
European Commission President Ursula von der Leyen announced a proposal this week for the European Union to impose a gradual embargo on Russian oil as part of its harshest sanctions package yet. The biggest obstacle to such a move? The bloc has yet to agree on when and how those controls will be instituted — not only signaling disunity in the bloc’s response to the invasion of Ukraine, but also potentially softening the embargo’s intended economic blow, at least in the short term.
Von der Leyen, who heads the executive arm of the EU, announced the plan as part of a broader sanctions package, which includes banning Russian propaganda outlets from broadcasting in the EU, imposing individual sanctions on Russian generals involved in the massacre at Bucha and the siege at Mariupol in Ukraine, and removing three banks, including SberBank — Russia’s largest — from the SWIFT payments system. EU member nations like Germany previously resisted the call to cut off Russian oil, citing the damage it could have on their own economies. Von der Leyen addressed those concerns, saying, “Let us be clear: it will not be easy. Some Member States are strongly dependent on Russian oil. But we simply have to work on it.”
Von der Leyen further explained that the embargo will apply to “all Russian oil, seaborne and pipeline, crude and refined,” and that the EU will eliminate its dependence on Russian oil in “an orderly fashion,” by “[phasing] out Russian supply of crude oil within six months and refined products by the end of the year.” But shortly after the announcement, Hungary, the Czech Republic, and Slovakia piped up with concerns that they wouldn’t have enough time to transition away from Russian oil before their extended deadlines — which would wreak havoc on their economies. Hungary, whose leader Viktor Orbán has maintained ties with Russian President Vladimir Putin, threatened to reject the EU’s sanctions package should Hungary not be permitted to continue importing Russian crude oil via pipelines. Since EU proposals require unanimity from all member states to enact, Hungary’s veto would torpedo the whole package.
And Greece, Malta, and Cyprus brought up issues of their own, Reuters reported Friday. Those nations have the largest shipping fleets in the EU; they raised concerns about the effect the embargo would have on their shipping industries. Greek tankers in particular shipped about half of all Russian oil exports in the weeks following the invasion.
“We are against the Russian invasion and of course in favor of sanctions. But these sanctions should be targeted, and not selective in serving some member states and leaving others exposed,” Cyprus’s President Nicos Anastasiades said at a press conference.
As of this weekend, negotiations are ongoing to turn around a sanctions package that meets the needs of all member nations, but it’s unclear when the bloc will agree on a final deal — and why von der Leyen announced the package before all states were in agreement.
Vox made several attempts to reach the European Commission for comment on the status of the negotiations but did not receive a response by press time.
This is the EU’s sixth sanctions package — and its most complicated yet
As von der Leyen said, this is the most significant and complex sanctions package the EC is poised to impose on Russia for its invasion of Ukraine. That means engaging in difficult negotiations and balancing competing needs and priorities.
Upon Russia’s invasion of Ukraine on February 24, “there were calls for an embargo almost immediately,” Thane Gustafson, a political science professor at Georgetown University and author of the book Klimat: Russia in the Age of Climate Change, told Vox on Saturday. “It’s taken some time to put things on the drawing board.” Given the challenge of getting all 27 member states on board with an oil embargo, Wednesday’s announcement actually came about fairly quickly; but that also indicates that EC members and leadership are “playing this by ear,” Gustafson said, hence the outcry from Hungary, the Czech Republic, Slovakia, and others.
Those nations don’t have energy alternatives to sustain their economies as of right now, which is why Hungary and Slovakia were initially offered an additional year — until the end of 2023 — to comply with the embargo. Hungary has requested an exemption to the import of crude oil by pipeline, and Slovakia and the Czech Republic are arguing for longer transition periods, according to the Financial Times. Although the details are still under discussion, reporting from Reuters on Friday indicated that the EC will extend the timelines for those countries to wean themselves off of Russian oil and provide assistance for refinery upgrades.
“The key thing is to bring the Hungarians on board,” Gustafson said. “There will be bargaining both ways,” he told Vox. That’s because of the EC principle of unanimity, not because Hungary — or, for that matter, Slovakia or the Czech Republic — consume enough Russian oil for their participation in the ban to matter in an economic sense, since Hungarian and Slovak imports account for only about 6 percent of the EU’s Russian oil imports, according to Reuters.
Will these sanctions deliver the intended blow to the Russian economy?
While Gustafson believes that there will be a decision on the oil embargo, “in the near term, it’s going to be a muted blow.” For one, there are still nations that will purchase Russian oil in the short term — although eventually, Gustafson told Vox, Russia will run out of the capacity to ship or store enough oil to make up for the losses from the EU embargo, thus forcing the industry to slow production, resulting in prices being driven down.
But according to the Wednesday Group, which tracks Russian oil exports, price increases on fuel have meant that Russia is raking in about as much money from sales as it did prior to the US decision to ban Russian oil imports back in March. Though the EU is the largest importer of Russian oil, the staggered transition timeline that the EC is proposing could potentially give Russia more time to negotiate exports to other nations; that’s already happening with India, the Washington Post reports,
The proposed ban is a major shift from EU policy just two months ago, when the bloc refused to join the full US embargo on Russian energy products. At that time, the bloc unveiled a plan to cut down on natural gas dependence by two-thirds by the end of this year; Wednesday’s announcement didn’t address that pledge or the topic of natural gas at all.
The natural gas question is complex, certainly, and Russia has been able to weaponize the resource, cutting off flows to Poland and Bulgaria for their refusal to buy it with rubles last month. Part of the issue, Gustafson explained, is that natural gas exports are governed by long-term contracts which can employ “take-or-pay” clauses — as in, a country either takes the product or pays for a specific amount even if it doesn’t take the gas. Shutting off access, therefore, isn’t just a matter of refusing to purchase the commodity. Finding an alternative source for natural gas isn’t that straightforward, either. The infrastructure to replace natural gas imports from Russia with imports from other countries like the US doesn’t yet exist at the necessary scale — and increased production and use would likely severely compromise climate goals.
Furthermore, Russia’s natural gas exports — both shipments as liquid natural gas and via pipelines like the now-scuttled Nord Stream 2 — have actually increased since the beginning of the war, according to the Center for Research on Energy and Clean Air.
But “the biggest question is Germany,” Gustafson said. The biggest economy in the EU, Germany relies heavily on Russian natural gas to heat homes and power its economy; dismantling that infrastructure without triggering a recession with wide-ranging effects will be a delicate negotiation indeed. Germany long ago developed “very elaborate” partnerships with Russia, Gustafson noted, particularly after the fall of the Soviet Union. Germany’s thinking was that such economic interdependence would ensure peace in Europe, which The Daily explained in an episode last month. The invasion of Ukraine undid decades of peace, and Germany’s energy transition will have to undo decades of cooperation with and dependence on Russian sources.
If and when the EC unanimously decides a path forward to wrest EU member nations from dependence on Russian fuel, it’s not clear what the desired effect of an oil or all-out fuel embargo would be. Theoretically, the goal of cutting off profits from Russia’s fuel industry is to stop Putin’s war machine by bleeding the Russian economy. It could take quite a long time before the EU’s embargo has that significant of an effect, though.
Wednesday’s announcement doesn’t appear to have altered Putin’s viewpoint, either. The Kremlin’s response to the embargo proposal has been in line with its attitude toward Western involvement in the war, Gustafson told Vox: “The dominant response, and certainly the public response, is defiance, and defiance toward the West.”
Correction, May 8, 4:18 pm: A previous version of this story misstated the function of the EU body Ursula von der Leyen heads. It is the executive arm.