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European Union ambassadors approved on Thursday the proposed partial ban on Russian oil imports into the EU as part of a sanctions package that also aims to cut Russia off the tanker insurance market and limit its ability to redirect seaborne oil exports to third countries.
After weeks of negotiations, the EU leaders clinched a deal late on Monday to ban Russian oil imports via sea by the end of the year. For weeks, Hungary had blocked a decision on an embargo after the European Commission proposed a full ban by the end of the year on all Russian oil imports. The initial proposal was watered down to an agreement on a ban on seaborne imports by the end of the year, with pipeline crude exempted, for now.
EU envoys who met on Thursday approved the plan to ban Russian seaborne imports of crude in six months and refined products in eight months, sources with knowledge of the matter told Bloomberg.
The six sanctions package also kicks Russia’s biggest bank, Sberbank, out of the international banking payment system SWIFT.
In one of the farthest-reaching measures yet, the sanctions package includes a ban on tanker insurance for Russian shipments to third countries, to take effect six months after the package is formally adopted.
The UK and the European Union have agreed to jointly shut off Russia’s access to oil cargo insurance, the Financial Times reported earlier this week, which would severely affect its ability to export crude.
This will likely contribute substantially to the already considerable turmoil in international oil markets, ultimately pushing prices even higher.
“It’s hard to underplay how significant a move this is by the UK and EU. Taking out insurance will have a huge impact on Russia’s ability to export its oil. It’s one of the toughest sanctions Europe has in its armoury,” said RBC Capital markets’ Helima Croft, as quoted by the FT.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
In fact China and India as well as Asian oil traders and even Western oil traders through their proxies are competing for Russian oil barrels. China’s Russian seaborne oil imports have risen from 750,000 barrels a day (b/d) last year to 1.0 mbd in the first quarter of 2022. Another 600,000 barrels a day (b/d) of Russian oil are piped to China raising the total to 1.6 mbd.
India, on the other hand, has been importing record volumes of Russian crude. In April and May this year India imported 24 (and 28 million barrels of Russian oil respectively.
Moreover, the EU ban on tanker insurance for Russian shipments to third countries will hardly impact Russian oil exports. The reason is that Russia could ensure its own crude tankers or give a price discount to its customers to provide the insurance themselves.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London