May 17, 2022


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EU proposes ban on Russian oil imports, removes Sberbank from Swift

EU proposes ban on Russian oil imports, removes Sberbank from Swift

European Commission President Ursula von der Leyen said Wednesday that the measures would form part of the sixth round of sanctions against Russia over its invasion of Ukraine.

“We are now proposing an embargo on Russian oil,” she said in a speech to the European Parliament. “Let’s be clear: it will not be easy. But we simply have to work on it. We will make sure that we are gradually getting rid of Russian oil in an orderly way, to double the pressure on Russia, while minimizing the impact on our economies.”

It added that crude oil supplies will be phased out within six months, and imports of refined oil products by the end of 2022.

News of the proposal, which still needs approval by all EU member states, boosted crude oil prices by more than 3.5%. Brent crude, the global benchmark, was trading at roughly $109 a barrel, while US oil futures were at $106 a barrel at 7.20 AM ET.

Oil prices are up around 40% since the start of the year amid fears that the Russian invasion of Ukraine could lead to a supply shock, driving up inflation and putting pressure on European economies.

European Union countries have already agreed to phase out Russian coal imports But the bloc found it more difficult to reach consensus on an oil embargo Despite weeks of conversations. Slovakia is reportedly seeking an exemption, and Hungary said on Wednesday it was concerned about what the proposal would mean for its energy security.
“We don’t see any plans or guarantees on how the transition will be managed based on the current proposals, and how Hungary’s energy security will be ensured,” said Hungarian government spokesman Zoltan Kovacs. Posted on Twitter.
Russia is the world’s second largest exporter of crude oil, and last year accounted for about 27% of the European Union’s oil imports. The United States, Canada, the United Kingdom and Australia have already banned imports.

These sanctions – and de facto embargoes by some European oil refineries and traders – have hit Russian oil prices. Its benchmark Urals crude is now trading at a discount of $35 a barrel to Brent, compared to less than $1 before the invasion.

The PCK oil refinery in Schwedt, Germany, is owned by Russia's Rosneft.

Some customers in Asia are said to be buying more Russian oil but not in enough quantities to make up for the loss of Western buyers.

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“Russia’s ability to redirect all unwanted shipments from the West to Asia is limited, which means that in the event of an embargo, Russia will have to cut production even more because it lacks the storage capacity for additional crude oil volumes,” analysts at Rystad Energy wrote. Monday’s research report.

Europe has bought $46 billion worth of Russian energy since the start of the Ukraine war

The International Energy Agency recently estimated that Russian oil supplies would decline by 1.5 million barrels per day in April as demand slumped, with those losses accelerating to 3 million barrels per day this month.

But the rise in global oil and natural gas prices means that Moscow continues to reap huge sums from its energy exports. Rystad estimates that Russia will collect more than $180 billion in energy tax revenue this year – 45% more than in 2021 – despite oil production cuts.

financial isolation

Western countries continue to look for other ways to make it difficult for Russian President Vladimir Putin to finance his war effort. Von der Leyen said the European Union is proposing removal Sberbank (SBRCY)and two other large banks, from SWIFT, the secure network used by more than 11,000 financial institutions to send messages and pay orders.
Sberbank is the largest bank in Russia.

The Association for Worldwide Interbank Financial Telecommunication, which is based in Belgium, must comply with European Union regulations. With no universally accepted alternative, this is an essential plumbing of global finance.

“We hit banks that are systemically important to the Russian financial system and Putin’s ability to wreak havoc,” von der Leyen said. This will reinforce the complete isolation of the Russian financial sector from the world system.”

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Three major Russian state-owned radio stations will also be banned from European airwaves.

Anna Cuban and Julia Horowitz contributed to this article.