The EU’s embargo on Russian oil imports was intended to counter Vladimir Putin’s war in Ukraine by denying his government billions of dollars in energy sales. It may be doing so, but it is also reconfiguring commercial ties between energy producers and the rest of the world.
EU dependence on Russian energy is expected to decline due to the embargo. It used to import a quarter of its oil from Russia. However, it is now “expected that an EU ban on Russian oil imports will result in a loss of 2 million barrels a day from Russia,” stated Michael Tran, RBC Capital Markets global energy strategist.
Saudi Arabia and the UAE are poised to reap the rewards of the embargo. As global supply is stymied and prices continue to increase, more European companies are seeking to buy oil from the Middle East, according to the New York Times.
India also stands to benefit; the country “is becoming the de facto refining hub for Europe,” according to Tran, because it is loading up on steeply-discounted Russian crude and refining it for sale.
Indeed, Russia recently surpassed Saudi Arabia and the United Arab Emirates to become India’s second-biggest oil supplier after Iraq.
In the U.S., the Biden administration authorized the release of roughly a million barrels daily from its strategic oil reserve to mitigate oil shortages and price hikes. The administration plans on tapping up to 180 million barrels for this purpose.
“The [EU embargo on Russian oil] will draw the United States more deeply into the global energy economy,” claims Meghan L. O’Sullivan, director of the Geopolitics of Energy Project at Harvard’s Kennedy School.
Although the U.S. Energy Information Administration forecasts that U.S. producers will increase output by an average of 800,000 barrels a day this year, domestic oil producers cannot easily drill for more crude, thus limiting the country’s potential contribution to global supply.
O’Sullivan also observed that the embargo is strengthening China’s energy ties with Russia.
Chinese oil demand remains robust, despite continued COVID-19 lockdowns. China increased its tanker imports of Russian crude, with one company alone quintupling its tanker fleet in an attempt to import 1.1 million barrels of Russian crude per day, according to Market Insider.
Even though Russia cannot unload its oil at the favorable prices enjoyed by other energy producers, Eastern markets appear willing to undermine Western sanctions against Russia for their economic advantage.