The EU imposes a ban on imports of Russian crude oil from December 2022 and oil products from February 2023.
Context
From December 5, 2022, European Union countries banned imports of most of Russia’s crude oil (around 90%). Subsequently, from February 5, 2023 EU countries also banned most imports of Russia’s petroleum products. At an EU meeting in May 2022 where these measures were debated, European Commission President Ursula von der Leyen made clear that these measures were in response to Russia’s illegal invasion of Ukraine in February 2022, saying that “Putin must pay a price, a high price, for his brutal aggression”.
Impact
These mechanisms targeted crude oil and oil products (e.g. diesel/kerosene). Reuters reports that in February 2023 Russia exports of crude oil and oil products to the EU dropped to 600,000 barrels per day – down from 1.3 million barrels per day the previous month, and 4 million barrels per day a year previous.
Responses
i) Russian government and industry responses.
A ‘loophole’ identified in these mechanisms was that the ban did not prevent EU states from buying oil that originated in Russia but was refined and re-exported in third countries such as India. One 2024 analysis reportedly found that in 2023 EU states had indirectly paid EUR1 billion to Russia for oil, partly as a result of this loophole. Estonia’s Deputy Foreign Minister Erki Kodar spoke to press recognising this problem, saying that “[t]he Russian regime keeps indirectly profiting from third countries that sell oil products produced from Russian origin crude oil to the EU”.
During EU deliberations over the ban in March 2022, Russian foreign minister Sergei Lavrov said that “[w]e will not persuade anyone to buy our oil and gas,” adding “[i]f they (the EU) want to replace it with something, they are welcome, we will have supply markets, we already have them.”
i)Third Party responses
Other states, notably India, increased their imports of Russian energy products.
Simultaneously to these measures, the EU, G7, and Australia also imposed a price cap on handling Russia’s crude oil unless it is costed at below US$60 per barrel. The US Treasury Secretary, Janet Yellen, said in a February 2023 statement that these measures, in combination with other sanctions, were “forcing Putin to choose between funding his brutal war or propping up his struggling economy”.
European consumers responded to the delay in commencement of the ban – it appears that the delay encouraged drivers to fill their tanks with Russian oil ahead of the ban – which is counterproductive to the aim of depriving Moscow of revenue.
In the WTO
In a statement to the Council for Trade in Goods on 6-7 July 2023 (Document G/C/M/146), the Russian delegate criticised the EU’s policy as being coercive and sought the “immediate lifting of unilateral trade restrictive measures, including those with extraterritorial implications, and the termination of their coercive actions aimed at forcing other WTO Members to follow suit”:
In respect of the energy crises, we would like to note that the collective West uses the demand for energy resources as a “political weapon”, of which it attempts to accuse us. The Russian fuel and energy sector was chosen as one of the immediate targets of the unilateral restrictive measures. Contrary to the traditional rhetoric about the adherence to market mechanisms, the collective West made a choice to introduce anti-market measures (ban on the import of Russian coal, oil and oil products; creation of “cartel of buyers” and establishment of the so-called “price ceiling” for crude oil and petroleum products; and limiting the supply of oil and gas equipment).
Status
This case is ongoing.
Reference list
Adomaitis, N. 2023. “How the EU ban on Russian oil imports affects oil flows.” Reuters. March 16. Available at: https://www.reuters.com/business/energy/how-eu-ban-russian-crude-affects-oil-flows-2023-02-27/
Bloomberg News. 2022. “Russia: We have enough oil and gas buyers even with sanctions.” March 10. Available at: https://www.aljazeera.com/economy/2022/3/ 10/russia-we-have-enough-oil-and-gas-buyers-even-with-sanctions
Corder, M. 2022. “EXPLAINER: Effects of EU Russia oil ban, Moscow’s response.” AP News. June 2. Available at: https://apnews.com/article/russia-ukraine-netherlands-moscow-brussels-9f3fef34db1f41ea8f2aaaed05e923a2
Ghaddar, A., R. Edwards, and R. Bousso. 2023. “Europe rushes to stock up on diesel ahead of Russian ban.” Reuters. January 16. Available at: https://www.reuters.com /business/energy/europe-rushes-stock-up-diesel-ahead-russian-ban-2023-01-16/
Government of the Netherlands. n.a. “Import ban on Russian crude oil and petroleum products.” Government of the Netherlands. Available at: https://www.government.nl/ topics/russia-and-ukraine/sanctions-against-russia-and-belarus/import-ban-on-russian-crude-oil-and-petroleum-products
Guarascio, F. and J. Chalmers. 2022. “EU’s toughest Russia sanctions yet snag on worries over oil ban.” Reuters. May 5. Available at: https://www.reuters.com/world/ europe/eu-lay-out-new-sanctions-russia-targeting-oil-imports-2022-05-04/
Yellen, J. 2023. “Statement by Secretary of the Treasury Janet L. Yellen on the Announcement on the Price Caps for Seaborne Russian-Origin Petroleum Products.” US Department of the Treasury. February 3. Available at: https://home.treasury.gov/news/ press-releases/jy1247