Thursday, May 5, 2022

German course reversal – EU is probably preparing embargo for Russian oil

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Increased pressure on Moscow: The EU could soon decide on further sanctions against Russia, including an import ban on Russian oil. Germany supports the plans, other countries could block.

The EU could adopt another package of sanctions against Russia in the coming days, which would also include oil import bans. A corresponding text is currently being prepared, and the EU Commission could present it in the coming days with a view to a meeting of ambassadors on Wednesday, as the AFP news agency learned from diplomatic circles in Brussels over the weekend.

According to information from the German Press Agency, the federal government supports the plans for the oil embargo. In the most recent preliminary talks, Berlin had clearly spoken out in favor of introducing an embargo, the agency learned from EU diplomats in Brussels. A corresponding decision by the European Union has thus become much more likely.

The reason for the German course reversal is likely to be the recent successes in the search for alternative oil suppliers. Economics Minister Robert Habeck (Greens) announced last Tuesday that Germany’s dependence on Russian oil had been reduced from 35 percent before the start of the Ukraine war to 12 percent within eight weeks.

Hungary in particular is seen as a potential blocker of a unanimous decision on sanctions that would then be necessary. After his re-election in early April, Prime Minister Viktor Orban announced that he would veto any form of energy embargo.

But also Austria and Slovakia as well as Spain, Italy and Greece are considered to be braking the oil embargo. According to diplomats, countries such as Slovakia and Hungary have so far been against a rapid import ban, mainly because of their great dependence on Russian oil supplies. In the southern European countries, meanwhile, the expected increase in energy prices after an embargo is viewed with great concern by consumers.

The next few days will probably show how the embargo plans will continue. According to information from the German Press Agency, the EU Commission, led by Ursula von der Leyen, intends to present the draft for the new package of sanctions against Russia as quickly as possible in order to further pressure the government in Moscow because of the war against Ukraine to increase once.

The big question with the oil embargo, however, was what should apply for transitional periods. Given the relatively large group of countries with concerns, the proposal could be to allow imports of Russian oil until the fall or even into the winter. According to dpa information, the Commission’s original plan was to present the new sanctions package at the beginning of the week, but it could now take a little longer due to ongoing coordination – including with partners outside the EU.

A conceivable alternative to an import ban is the introduction of price caps for oil from Russia. Proponents argue that they could also ensure that Russia makes significantly less money from energy exports – but at the same time the risks for the European economy should be lower.

However, a prerequisite for the functioning of such a plan would be that no Russian oil is bought at prices above the upper limits, even from countries outside the EU. According to estimates by the Bruegel think tank, Russian oil worth around 450 million euros was recently imported into the EU every day.

In addition to new sanctions against the Russian oil sector, the new EU sanctions package is likely to include further trade restrictions and punitive measures against more people and companies. According to dpa information, this time the largest Russian bank, Sberbank, should also be among the latter.

Because of the Russian war in Ukraine, the EU countries had already decided to ban the import of Russian coal. The Ukraine and EU countries such as Poland and the Baltic countries have long been calling for an expansion to include oil and gas.

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