“A European embargo on Russian gas and oil could be organized under the aegis of the International Energy Agency”

Grandstand. By deciding to stop all purchases of Russian oil and gas, US President Jo Biden has stepped up economic sanctions against Russia after the isolation of its Central Bank and the access restrictions of several of its its commercial banks to the Swift network. The country’s economic lifeblood, hydrocarbons provide 45% of federal budget revenue and around two-thirds of the country’s foreign currency.

But the United States only buys 7% of Russian oil, and no gas. The impact will be marginal as long as Russia’s other sources of foreign exchange are not cut off. Should the Europeans take over? This is the thorny issue on the table of the Heads of State gathered today and tomorrow in Versailles.

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Europe buys practically three-quarters of the gas and almost half of the oil (in crude form and in refined products) exported by Russia. An immediate embargo on all these products would take on a whole new dimension. Would it allow to touch the economic and financial lung of the country?

Abnormally low stocks

In the context of the current functioning of the markets, a European embargo cannot work if it is not coordinated with other draconian measures making it possible to reduce energy demand. Worse, it would probably turn against its promoters: Europe would suffer a massive rise in its energy supply costs, with probable disruptions in physical gas flows. Russia, for its part, could compensate for the cut in its deliveries to Europe by better valuing its deliveries to Asia.

The case of gas has been the subject of convergent analyzes by the European analysis center Bruegel and the International Energy Agency (IEA). The European Union depends up to 40% on Russia for its supplies. In the short term, it is impossible to find substitutes due to constraints on physical infrastructure, particularly transport.

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Europe certainly has stocks. But these are already abnormally low because Russia preventively curbed its gas exports at the end of 2021. There remain the demand-saving measures which, for gas, mainly concern the production of electricity, heating and industrial uses.

In his 10 point plan, the IEA lists the actions on supply and demand that would make it possible to reduce European dependence. In the short term, the most impactful actions concern demand, but they are not enough if they are limited to Europe. But why confine oneself to this geographical perimeter?

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