The results of sanctions against Russia and its oligarchs have left the West searching to find new ways to slow the Russian economy. The latest idea from the European Union is to inflict a complete embargo on Russian oil.
The current sanctions imposed by the EU, the United Kingdom, and the United States do not seem to have the power to cripple Russia’s economy as desired.
For the time being, Germany, Europe’s largest economy, continues to oppose an immediate oil embargo, claiming that such a prohibition would plunge Germany and Europe into a deep recession.
“I hope that in the weeks to come we will convince our European partners to stop importing Russian oil,” said France’s Finance Minister Bruno Le Maire.
J.P. Morgan reports that Russia’s current crude exports average 360 kbd (thousand barrels per day) above the levels seen before the invasion of Ukraine.
The rising cost of oil is a problem for the EU as its standard of living issues become more visible. Global leaders are choosing between several options, including the use of an immediate ban on oil crossing EU borders.
A full and instant ban is more likely to affect European consumers than Russian producers.
More crucially, a complete and immediate ban would almost certainly drive oil prices to $185/bbl (barrel of crude oil).
It would also cut out more than four mbd (million barrels per day) of Russian oil from the supply with no room or time to reroute it to China, India, or other prospective substitute purchasers.
The more likely option is to adopt a similar method to the European ban on Russian coal imports and steadily reduce the use of Russian oil. In April, the EU began its sanctions against Russian coal companies, expecting them to be complete come August 2022.
If the EU decides to impose an embargo on Russian oil, European officials expect the action to take “several months.”