Christoph Herwartz, correspondent in the Handelsblatt office in Brussels, analyzes trends and conflicts, regulatory projects and strategic concepts from the inner workings of the EU. Because anyone interested in business needs to know what’s going on in Brussels. You can reach him at [email protected]
It is a clear warning from the US that an immediate halt to Russian oil supplies to the EU would have “damaging effects on Europe and other parts of the world,” Treasury Secretary Janet Yellen said last week. The US is actually more research-oriented than the Europeans when it comes to sanctions against Russia. They have already stopped their own oil imports.
The reason for this is simple: the US is significantly less dependent on Russian imports than the EU. That’s why it’s easy to cut the connections. But Europe gets large amounts of oil from Russia and would have to replace it with imports from other countries.
That would cause prices to rise sharply – and thus harm Americans as well. With every sanction, US citizens want to know from their government what it means for prices at the pump. And an EU embargo would probably cause greater price swings there than the US embargo.
Yellen also supports the argument that an oil embargo might do little harm to Russia, even though oil revenues so far have far outpaced gas revenues. Because oil is mainly shipped in tankers, while gas is preferably exported by pipeline. The tankers could be diverted and the oil would then be sold in Asia at the higher market price.
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Nevertheless, oil is said to play a role in the EU’s next package of sanctions. This sixth package is currently being prepared in the EU Commission and should be presented to the representatives of the member states for discussion as soon as possible. It is speculated that this could be the case as early as this week.
Problems with the oil embargo
It is very likely that transactions with Sberbank will be banned. It manages deposits worth almost half a trillion euros, more than all the banks previously sanctioned by the EU combined. So far, Sberbank has been exempt because it did not want to jeopardize energy supplies. The risk is now assessed differently.
>> Read here: We have to limit ourselves to secure the gas supply in winter. A guest comment.
But how do you want to solve the problems with the oil embargo? Commission President Ursula von der Leyen wants to develop “clever mechanisms”, she told the “Bild”. It is speculated that there should at least be significant differences in terms of different types of oil and oil products.
The transport route, i.e. whether the raw material comes by ship or pipeline, could also be taken into account. Some refineries are particularly geared to crude oil from the Urals, and the refinery in Schwedt in Brandenburg is supplied directly from Russia via a pipeline, which makes conversion difficult.
Economists also suggest an interim solution if an embargo seems too risky: a tariff on Russian oil. This could make the oil more expensive for European customers, but not as much as an embargo would, argued Axel Ockenfels from the University of Cologne and Georg Zachmann from Bruegel in the “FAZ”.
The Russian suppliers could probably not pass on part of the customs duty, so they would have to pay it themselves. Incidentally, Russian money would flow into the coffers of the EU.
More: Recession and high inflation – the Bundesbank expects an energy embargo to have drastic consequences