Trending Now
We have updated our Privacy Policy and Terms of Use for Eurasia Group and its affiliates, including GZERO Media, to clarify the types of data we collect, how we collect it, how we use data and with whom we share data. By using our website you consent to our Terms and Conditions and Privacy Policy, including the transfer of your personal data to the United States from your country of residence, and our use of cookies described in our Cookie Policy.
{{ subpage.title }}
A guide to the EU’s lukewarm Russian oil embargo
After months of diplomatic wrangling, it seemed this week like the European Union had finally made a big breakthrough in its effort to punish President Vladimir Putin for attacking Ukraine. Oil prices soared, and gas hit new highs after Brussels announced that it had reached an agreement to phase out Russian oil imports by the end of the year.
But the agreement also includes a slate of carve-outs and caveats that could dilute the bloc’s effort to decapitate the Kremlin’s war machine.
What’s in the deal?
The agreement includes a ban on all seaborne Russian oil imports by the end of the year. That covers about two-thirds of the bloc’s total crude imports from Russia – the remaining third comes via pipeline. And since Germany and Poland have pledged to voluntarily ditch oil brought in by pipeline as well, some 90% of Russian imports to Europe would be shut off by the end of the year.
Moreover, it also appears that the EU is set to ban insurance providers from covering tankers carrying Russian oil anywhere in the world. Given that British and other European companies dominate the marine insurance industry, this move will significantly undercut Russia’s ability to offset its losses by selling more oil to Asia.
What’s not in the package?
Part of the reason it’s been so hard to reach a deal is because of opposition from three landlocked EU member states: Hungary, Slovakia, and the Czech Republic. (Slovakia, for instance, gets almost 100% of its oil from Russia.) Hungary's PM Viktor Orbán, who is buddies with Putin, drove the hardest bargain and was most vocal in his refusal to sign onto a Russian oil embargo. He argued that such a move would be economically catastrophic for his country, which depends on Russian pipelines for 65% of its oil. Because the sanctions package requires unanimous approval from EU member states, the holdout would have killed the entire project.
To save face and avoid an embarrassing admission that it couldn’t strike a deal, Brussels capitulated to Budapest’s demands this week, saying that it will continue to allow imports via pipelines and will work out the precise end date for that exemption later.
Despite the obvious disconnect, both Brussels and Budapest are claiming victory. The EU has touted the deal as a triumph for European unity and the maximum pressure campaign against Moscow. Orbán, on the other hand, wrote on Facebook that “an agreement was reached. Hungary is exempt from the oil embargo!” This carve-out only accounts for 10% of Russian exports to the EU. Still, it means that Moscow will be able to continue shipping at least some exports to Europe.
Deferring thorny decision-making never works out well for the sprawling EU. “Agreeing on ending the exclusion of Russian oil delivered via pipelines will not be easy,” says Emre Peker, a Europe Director at Eurasia Group.
“It could take a few months, and even when a deal is done the extended phase-outs as proposed are likely to survive,” he says. So, can the EU still inflict significant pain on Russia if pipelines remain online? Peker says that will only be possible if “Brussels can forge consensus on curtailing Russia’s ability to export crude elsewhere” around the world.
Will Russia feel the pain?
The ban will undoubtedly hurt Russia. Losing two of its biggest crude importers – Germany and the Netherlands – is a big loss. Still, Asia continues to guzzle Russian oil, with China, the largest single purchaser, accounting for almost a third of all Russian crude exports, and South Korea accounting for roughly 7%. What’s more, Europe had already paid Russia 21 billion euros ($22.3 billion) for oil in the first few months since Putin invaded Ukraine. That’s a lot of money for Moscow’s ongoing war machine.
And even when things get rough, Russia can still sell oil for a discount. Notably, two mammoth economies – China and India – have opted not to join the West’s sanctions campaign against Russia. India, for its part, received more than 24 million barrels of Russian oil last month, up from about 3 million in March. China is also trying to make the most of a crude bargain.
What’s at stake for the West?
Indeed, while the insurer ban will make it much harder for Russia to sell its oil, it will also likely keep prices higher, revealing the extent to which Western states are willing to inflict pain on their own constituencies – even as inflation reaches record highs throughout the Eurozone – to punish Russia.
In adopting a hardline anti-Russia stance, EU member states also risk backlash at home where not everyone is on board with the plan: 62% of Slovaks, for instance, oppose ditching Russian oil. As energy prices continue to rise – and a deepening cost of living crisis sweeps the continent – European governments could be risking the revival of a fiery populist wave.
This comes to you from the Signal newsletter team of GZERO Media. Subscribe for your free daily Signal today.
Ukrainian President Volodymyr Zelenskiy during an address in Kyiv, Ukraine
What We're Watching: Zelensky stays put as EU, US sanction Putin & Biden Supreme Court nominee makes history
Zelensky staying as EU, US, Canada set to sanction Putin. As Russian forces entered the Ukrainian capital of Kyiv on Friday, the US, Canada, and the EU said they would freeze the assets of Russian President Vladimir Putin and his foreign minister, Sergey Lavrov. British Prime Minister Boris Johnson had earlier announced a similar move. Though most analysts say that Putin has used fronts to shield his personal wealth from measures like this, the move marks a significant symbolic escalation and further isolates the Kremlin from the international community. Meanwhile, Ukrainian President Volodymyr Zelensky says that he will remain in the country, despite reports that he and his family are on the Kremlin’s “kill list.” Reports of de-escalation talks in Minsk appear to be dead in the water as Moscow continues to pummel major Ukrainian cities, and as officials in Ukraine tell residents to take up arms and “prepare Molotov cocktails.” Meanwhile, on Friday evening, the UN Security Council voted on a resolution condemning Russia's military offensive in Ukraine, with China and India abstaining. China's vote is seen as helpful in further isolating Russia.
Judicial history in the making. Judge Ketanji Brown Jackson was nominated to the US Supreme Court by President Joe Biden on Friday. If confirmed, Jackson would become the first Black female justice on the nation’s highest court. "I believe it's time that we have a court that reflects the full talents and greatness of our nation with a nominee of extraordinary qualifications,” Biden said of Jackson, who currently sits on the U.S. Court of Appeals for the D.C. Circuit. She has worked as a commissioner on the US Sentencing Commission, a private lawyer, on two federal courts and as an assistant federal defender. Nominated to replace the retiring Justice Stephen Breyer, for whom she once clerked, Jackson begins meeting with legislators on the Hill next week, and confirmation hearings should begin within weeks. Should she secure the role, the ideological makeup of the court — with 6 conservatives and 3 liberals — will remain the same. Republican Sen. Lindsey Graham was quick to label the pick a win for the “radical left,” and most Republican senators are expected to oppose Jackson’s confirmation. Democrats would prefer bipartisan support, which adds credibility to the court, but they can confirm her without a single GOP vote so long as all 50 Democratic senators vote in favor of Jackson.
What We're Watching: Bangladesh religious violence, Ecuadorian drug emergency, Lebanese to vote, Russia ditches NATO
Religious tension rising in Bangladesh: Clashes between Hindus and Muslims in Bangladesh have surged over the past week, leaving at least four people dead. After an image was posted on Facebook showing the Quran at the feet of a statue at a Hindu temple, Muslims burned Hindu-owned homes and attacked their holy sites. Both sides have taken to the street in protest, with Hindus saying that they have been prevented from celebrating Durga Puja, the largest Hindu festival in the country. Such acts of sectarian violence are not uncommon in Bangladesh, a majority-Muslim country where Hindus account for nine percent of the population. Indeed, as Eurasia Group's Kevin Allison recently warned, unverified social media content stoking inter-ethnic conflict is a massive problem throughout South Asia, where for many people Facebook is synonymous with the internet.
Ecuador's state of emergency… again: Ecuador's President Guillermo Lasso has declared a nationwide state of emergency to deal with surging crime fueled in large part by drug trafficking. The measure allows the government to limit freedom of movement and assembly, and gives the military authority to patrol the streets. This comes less than a month since Lasso, a pro-business social conservative elected in February, declared another state of emergency after a gang war inside a jail in the port city of Guayaquil killed more than 100 people. The oil-rich Andean nation of 17 million people has become a transit country for Colombian and Peruvian cocaine where Mexican drug cartels are becoming more influential. The state of emergency might limit burglaries, auto thefts and homicides in the short term, but what happens when it's lifted?
Will Lebanese elections matter? Less than a week since Lebanon saw some of its worst sectarian street violence in years, its parliament voted to hold new legislative elections on March 27, two months earlier than planned. (However, a simultaneous vote on introducing female quotas in parliament failed to pass.) It'll be the first popular vote since 2019, when mass protests over political corruption and economic crisis rocked the country. The pressure is now on for Najib Mikati — who became interim prime minister in July after months of political deadlock — to secure a financial recovery package from the IMF that would pave the way for more international investment and aid as the country plunges further into one of the worst economic catastrophes in modern history. Talks with the IMF will be tough because the government and banks aren't willing to implement the public sector reforms or debt restructuring initiatives that the Fund wants. Indeed, as sectarian tensions linger and many kleptocrats retain prominent roles in Lebanese political life, the upcoming election may not move the needle at all.