As Russia has escalated its war against Ukraine, killing civilians and triggering a massive refugee crisis, this Tuesday President Joe Biden announced a ban on importing Russian oil and gas. Critics of Vladimir Putin have said that this would be the best, perhaps the only, way to force Moscow to back down from its offensive against the Ukrainian people..
A full embargo would be more effective if it included European allies, who are also desperate to stop the violence in Ukraine and the danger Moscow poses to the continent. However, it is unclear whether European countries will join the US initiative.
Unlike Washington, Europe is deeply dependent on the energy it imports from Russia.. While the United States could replace the relatively small amount of fuel it receives from Moscow, Europe could not, at least not in the short term.
What’s more, any restrictions on Russian oil exports would already send crude oil and gasoline prices skyrocketing on both continents, putting further pressure on consumers, businesses, financial markets and the global economy.
Here’s a deeper look:
WHAT WILL HAPPEN TO THE US BAN ON RUSSIAN OIL?
Amid rising gasoline prices in the United States –the average price exceeded $4 per gallon for the first time since 2008-the Biden administration is facing mounting pressure to impose more sanctions on Russia.
For now, a broad ban between the United States and Europe seems elusive. On Monday, the German Chancellor Olaf Scholz made it clear that his country, the largest consumer of Russian energy in Europe, has no plans to join any ban. In response, the US Undersecretary of State, Wendy Shermanhinted that the United States could act alone or with a smaller group of allies.
Although Biden has tried to work together with the european alliesrecognized that many are not announcing a similar ban because they are more dependent on Moscow for oil and gas.
“So that we can take this step when others cannot”, said. “But we are working closely with Europe and our partners to develop a long-term strategy to also reduce their dependence on Russian energy.”
“We haven’t been completely identical on every sanction,” Sherman said. “Not all countries have done exactly the same, but we have all reached a threshold that is necessary to impose the severe costs that we have all agreed to.”
The Biden administration and Congress “remain focused on reducing higher energy costs for American families and our partners stemming from Putin’s invasion,” House Speaker Nancy Pelosi said.
The Democratic leader, who has voiced her support for the US ban on Russian oil, also cited the head of state’s action in leading US allies to release 60 million barrels of oil from strategic reserves, including 30 million barrels of US reserves, to try to stabilize global markets.
WHAT HAPPENS IF THE UNITED STATES ACTS ALONE?
If the United States acts alone to ban imports of Russian oil and refined products, the impact on Moscow would likely be minimal. The United States imports a small part of Russia’s oil exports and buys none of Moscow’s natural gas.
The United States imports about 100,000 barrels a day from Russia, only about 5% of Russia’s crude oil exports, according to Rystad Energy. Last year, about 8% of US imports of oil and oil products came from Russia.
The United States, meanwhile, could replace Russian crude with imports from Saudi Arabia and the United Arab Emirates. For its part, Russia could find alternative buyers for that fuel, perhaps in China or India. Such a step would “introduce massive inefficiency into the market,” driving up prices, said Claudio Galimberti, senior vice president of analytics at Rystad Energy.
However, if Russia were cut off from the global market, Galimberti said, rogue countries like Iran and Venezuela could be “welcomed back” as sources of oil. Such additional sources could, in turn, potentially stabilize prices.
A team of officials from the Biden administration was in Venezuela over the weekend to discuss energy and other issues, the White House press secretary acknowledged. Jen Psaki. Officials discussed “a variety of issues, including certainly energy security.”
HOW COULD THE OIL BAN IN RUSSIA AFFECT PRICES?
A month ago, oil was selling for around $90 a barrel. Now, prices are above $120 a barrel, as buyers shun Russian crude and many refiners fear sanctions in the future. They worry that they will be left with oil that they would not be able to resell as gasoline if sanctions were imposed in the near future.
Shell said on Tuesday it would stop buying Russian oil and natural gas and close its filling stations, jet fuels and other operations there, days after Ukraine’s foreign minister criticized the energy giant for continuing to buy Russian oil.
Energy analysts warn that prices could rise as high as $160 or even $200 a barrel of crude oil if the West imposes oil sanctions or if buyers continue to avoid Russian crude.
Soaring oil prices could push an average US gallon of gasoline above $5 a gallon, a scenario Biden and other political figures are desperate to avoid.
ARE IMPORTS FROM RUSSIA ALREADY DECREASING?
The US oil industry reported that it shares the goal of reducing dependence on foreign energy sources and is committed to working with the Biden administration and Congress. Even without sanctions, some US refiners have terminated contracts with Russian companies. Imports of crude oil and Russian products have plummeted.
“Our industry has taken important and significant steps to undo relations” with Russia and voluntarily limit Russian imports, he said. Frank Macchiarolasenior vice president of the American Petroleum Institute, the largest lobbying group for the oil and gas industry.
Preliminary data from the US Department of Energy shows that imports of Russian crude fell to zero in the last week of February.
The petroleum institute has not taken a formal position on legislation to ban imports of Russian oil. But he says he would comply with the restrictions imposed.
WILL EUROPE FOLLOW?
A ban on Russian oil and natural gas would be painful for Europe. Russia provides about 40% of Europe’s natural gas for domestic heating, electricity and industrial uses and about a quarter of Europe’s oil. European officials are looking for ways to reduce their dependency, but it will take time.
Russian Deputy Prime Minister alexander novak, underscored that urgency, saying Russia would have “every right” to stop natural gas shipments to Europe via the Nord Stream 1 pipeline in retaliation for Germany’s halting of the parallel Nord Stream 2 pipeline, which was not yet operational. He added that “we have not made this decision” and that “no one would benefit from this.” It was a change from previous Russian assurances that they had no intention of cutting off gas supplies to Europe.
Oil is easier to replace than natural gas. Other countries could increase oil production and send it to Europe. But a lot of oil would have to be replaced, and this would drive prices up even more because the oil would probably have to travel farther.
Replacing the natural gas that Russia provides to Europe is probably impossible in the short term. Most of the natural gas that Russia supplies to Europe travels through pipelines. To replace it, Europe would primarily import liquefied natural gas, known as LNG. The continent does not have enough pipelines to distribute gas from coastal import facilities to places further afield.
In January, two-thirds of US LNG exports went to Europe. Some ships full of LNG were bound for Asia but turned around for Europe because buyers offered to pay higher prices, according to S&P Global Platts.
While US oil and gas producers could drill for more natural gas, their export facilities are already operating at full capacity. Expanding those facilities would take years and billions of dollars.
(With information from AP)
Joe Biden announced the ban on all imports of Russian oil and gas due to the invasion of Ukraine
Shell will stop buying gas and oil from Russia and close its fuel stations
Europe seeks options not to buy energy from Russia, which threatens to cut off its gas