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An oil and gas embargo is under discussion in the EU. But the EU countries do not agree.
What is an oil and gas embargo about? In the current case, the energy ministers of the EU countries are considering no longer purchasing oil or gas from Russia. According to calculations by the dpa news agency, the EU has transferred 44 billion euros to Gazprom Bank since February 24, since the beginning of the war. Around 50 percent of all oil and gas purchases by the EU come from Russia, according to Elisabeth Christen. Christen is a foreign trade economist at the Austrian Institute for Economic Research in Vienna.
How is Russia reacting? For its part, Russia has already decided to stop supplying gas to EU countries Bulgaria and Poland. As a further step, Russia could ban other oil and gas exporting countries in its sphere of influence from supplying energy to the Europeans, for example the countries of Azerbaijan and Kazakhstan. The expert also notes that if the EU were to decide on an oil embargo, Russia could respond by shutting off gas across Europe. One has to take into account that Russia might take retaliatory measures.
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A demonstrator in Germany calls for an embargo. This is now being discussed by the EU.
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Why do some EU countries want to impose a gas and oil embargo on Russia? According to Christen, the aim of the EU with this new planned sanction is to further restrict Russia’s foreign exchange earnings and to isolate the Russian economy even more. This has already happened with the partial exclusion from Swift and the sanctions against the Russian central bank. «A part of Russia’s income from oil and gas production is converted into rubles by Gazprom Bank. This will support the exchange rate.” If this were also eliminated, Russia would have fewer revenues, both for the war and for the economy.
Do the EU countries agree? The 27 EU countries do not agree at all on this new sanction. Hungary even threatens to veto it. This would prevent an embargo because the decisions in the EU Commission have to be taken unanimously. In particular, Central and Eastern European countries are more dependent on Russia’s energy than Western European countries.
A pure oil embargo is not entirely unrealistic.
How realistic is a decision on an oil and gas embargo against Russia? Christen says: “The negotiations are difficult, but a pure oil embargo is not entirely unrealistic.” The search for alternatives is easier with oil than with gas. Russia has a monopoly on gas.
Could oil and gas from other countries be used at all? According to the expert, there is no infrastructure in many countries other than that for Russian energy. Most countries are strongly linked to Russia in the energy sector. This is another reason why a short-term changeover is difficult.
What would be the economic consequences for the EU? As dependency on Russian energy varies, so do the consequences of an embargo. But the EU could jointly conclude alternative contracts for energy supplies, for example with Algeria or the USA. This energy would then be distributed to the countries according to a distribution key. That would mitigate the consequences somewhat.