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The European Union has paid some $50 billion for oil, gas, and coal imports from Russia since the country invaded Ukraine in late February, Standard Chartered said in a Commodity Roadmap report this week.
The data comes from the Finland-based Centre for Research on Clean Air and Energy (CREA). The biggest portion of the payments was for natural gas, followed by oil, and coal imports represented the smallest portion.
Citing data about Russia oil revenues from the International Energy Agency, StanChart concludes that on a daily basis, EU energy payments to Russia have amounted to four times Russia’s daily military expenditure.
“We think there is a consensus among EU governments that isolation of Russia is likely to be long-term and that energy trade should be minimised,” the authors of the report noted. “However, there are differences regarding timescales and potential exemptions.”
Hungary, Slovakia, and Bulgaria have asked for exemptions from the oil embargo discussed by the European Union because of their overwhelming dependence on Russian oil and inability to secure sufficient alternative supplies in short order.
In fact, securing alternative supplies of crude oil will be challenging across the European Union as there are precious few producers that could increase their oil output quickly and the biggest of them, Saudi Arabia and the United Arab Emirates appear unwilling to do it.
“The trade in Russian oil into Europe has already fallen sharply without explicit sanctions being imposed; the more difficult area remains the higher economic cost involved in cutting gas flows,” the StanChart analysts also noted.
“EU governments have been wary of accepting that cost; however, we think this is changing now that the potential scale of Russia’s ambition to reshape eastern Europe has become clearer.”
The authors concluded that the energy market might be surprised at the speed with which the EU moves away from Russian hydrocarbons in the coming months.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
This is exactly what will happen if the EU goes ahead and ban Russian oil imports. Brent crude could be expected to head toward $130-$140 a barrel thus adding an additional $40-$50 bn to an already hefty EU oil import bill.
Banning Russian oil won’t break the Russian war machine because it will lead to higher oil and energy prices thus benefiting the Russian economy. Instead, it will be harming the economies of those who are imposing the sanctions.
Therefore, it is cheaper for the EU to continue importing Russian crude at the current prices than to ban them and then tries to buy the same volumes at prices 30% higher. And that depends on finding alternatives to Russian oil supplies.
There is not one single producer in the world or a group of producers including OPEC+ and US shale oil that could replace 8.0 million barrels a day (mbd) of Russian oil or even half of that now or even in 20 years from now. Even the Secretary-General of OPEC+ has been telling the EU that Russian oil exports are irreplaceable but to no avail.
The EU is letting its hatred of Russia cloud its sanity but it’s the EU economy which will pay the price not Russia. The rest of the world including the world’s largest and third-largest economies based on purchasing power parity (PPP) China and India is open to Russia.
Moreover, banning Russian oil supplies isn’t a foregone conclusion. It only needs a veto from Slovakia or Hungary or Bulgaria to sink it.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London