Page 4 - FSUOGM Week 22 2022

FSUOGM COMMENTARY FSUOGM

EU agrees Russian oil ban, but

impact debatable

Restricting Russia's access to Europea shippers and insurers would likely
have a greater impact in curtailing the country's oil exports

RUSSIA EU leaders have agreed in principle to cut Rus- expected to equate to 10% of the amount the EU
sian oil imports by 90% by the end of this year, currently buys from its eastern neighbour.
WHAT: after Hungary, Slovakia and the Czech Republic “Left over is around 10-11% that is covered
The EU has finally effectively secured exemptions from the ban. by the southern Druzhba,” European Commis-
imposed its ban on How successful the embargo will be in sion President Ursula von der Leyen told report-
Russian oil. depriving Moscow of revenues that it can use ers after the ban was agreed. But the European
to fund the war in Ukraine is debatable, how- Council will revisit this exemption “as soon as
WHY: ever. Russia will be able to divert some exports possible,” she said.
Some countries including to other markets, whereas Europe will further The EU’s failure to get every country on board
Hungary have secured an inflate its already swelling energy bill. with the ban was to be expected. However, it is
exemption. After weeks of political wrangling, all 27 significant that Germany agreed to cease oil pur-
EU members agreed to the partial embargo of chases from Russia, in a reversal from its previ-
WHAT NEXT: Russian oil. The ban will affect all Russian oil ous position.
Russian exports will imported via sea, which is around two-thirds of As for the ban’s impact, Russia currently
decline steeply as a the total. Poland and Germany have also com- sends between 3 and 3.7mn barrels per day (bpd)
result of the move, but mitted to halt purchases via the Druzhba oil of Urals oil to Europe, and while it would be able
preventing Russia from pipeline system. to divert some supplies to Asia, and process more
using European shippers The main obstacle to the ban had been oppo- oil at home to produce fuels such as gasoline and
and insurers would have sition from Hungary. The country lacks infra- diesel, which are not covered by the ban, it would
a greater impact. structure to obtain sufficient oil from elsewhere, be unable to fully replace EU exports.
and its refineries would need upgrades to process Russia could at best reroute 1mn bpd of oil
blends other than Russia’s Urals grade. Hungary, previously destined for Europe, according to
along with the Czech Republic and Slovakia, will Rystad, which would imply $3.4bn per month of
keep receiving Russian oil, with their purchases lost revenue, out of the total of $8.1bn it gets for

P4 www. NEWSBASE .com Week 22 02•June•2022