European Union Discussing Ban of Russian Oil by Year’s End

The European Union has announced plans to move from restricting imports of Russian oil to an outright ban by the end of this year.

In addition to ending purchases of oil from Russia, the EU is pressing for more expansive financial sanctions on Russia and its allied nations. Those would include banning more financial institutions from Russia and Belarus from the SWIFT international financial communications network.

The EU is specifically targeting Sberbank PJSC, the largest bank in Russia. That bank has been sanctioned by the U.S. and U.K. but has been providing economic support to large parts of the Russian economy during the Ukrainian invasion.

A formal declaration could come next week at a meeting of national ambassadors to the EU. In order for EU sanctions to take effect, all 27 member nations must agree to enforce them inside their borders. Some member states like Germany and Hungary have been hesitant to restrict imports of oil from Russia because of their great dependence on them to meet domestic energy needs.

In 2019, nearly two-thirds of all crude oil imported by member nations of the EU came from Russia.

A full ban on oil imports would reportedly increase tensions between the EU and Russia. Russia would lose substantial income from a major marketplace and the EU would likely struggle to replace the energy supply without significant turmoil. Another concern is that import sanctions could boost Russia’s oil income in an unintended way if it finds other trade partners like China willing to absorb its supply.

Currently, Russian imports to EU nations are resulting in payment issues. As most Russian banks have been booted from the SWIFT network, it has become much more difficult to effectively conduct business with Vladimir Putin’s government and Russian producers.

Many Russian companies have added to the difficulties by requiring EU nations to pay for oil in Russian rubles. Poland and Bulgaria have already seen their imports from Russia cut off because they have failed to meet the demand for payment in the troubled Russian currency.