EU proposes a ban on Russian oil imports
LEILA FADEL, HOST:
The U.S. has already banned oil imports from Russia. Now Europe is thinking about doing the same. The EU's president, Ursula von der Leyen, is proposing phasing out Russian crude oil imports within six months and refined oil products from Russia by the end of the year.
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URSULA VON DER LEYEN: And let's be clear - it will not be easy because some member states are strongly dependent on Russian oil, but we simply have to do it.
FADEL: The ban would only go into effect if all 27 member nations approve, but oil markets are already responding with a sharp rise in prices. Here to talk about this is Ben Cahill. He's a senior fellow at the Center for Strategic and International Studies here in Washington, D.C. Good morning.
BEN CAHILL: Hi, Leila.
FADEL: So, Ben, as the head of the EU noted in her speech to the European Parliament, this is not an easy thing for Europe to undertake. So how hard would this be for member nations?
CAHILL: It would be really difficult. I mean, Russia is not your run-of-the-mill oil producer. It's one of the three big oil producers in the world, along with Saudi Arabia and the United States. It's the world's largest oil exporter, if you combine crude and products, and Europe relies on Russia for more than a quarter of its oil. You know, if you combine crude oil and petroleum products, Russia supplies about 8% of global demand, so it's really hard to dismiss that.
CAHILL: You know, even six months to a year is a pretty aggressive timeline to do something like this.
FADEL: I mean, is it even possible for Europe to survive without Russia's supplies?
CAHILL: Well, we're about to find out.
CAHILL: I think what's going to happen is that, eventually, there'll be a reordering of crude flows around the world. So less will flow - or perhaps not at all - from Russia to Europe. Europe will have to look to other suppliers, like the Middle East, North Africa, the United States, and try to find crude and products wherever it can. But it takes time to do something like this, and, you know, frankly, the scale of this kind of disruption is something that we haven't seen on this timeline.
CAHILL: It's going to be tough.
FADEL: Do we have an idea of how broad the support is for this kind of ban?
CAHILL: I think one of the challenges is that the decision within the EU has to be unanimous. And if you look across the EU, there's a pretty big variation in dependence on oil from Russia.
CAHILL: So some countries, like Hungary and Slovakia, are heavily dependent on Russia. So I think that the EU proposal is going to allow, you know, a longer time to phase in full sanctions on Russian imports - maybe until the end of '23. But still, I think it's going to be pretty difficult to get everyone to go on board. And the reality is that, you know, some countries are much more economically exposed and more at risk.
FADEL: And what kind of impact can the wider international community expect if this ban goes into place?
CAHILL: We're really in uncharted territory, and I think that we have to expect that Russia is going to respond and lash out in different ways. You know, it's possible they'll make a preemptive strike by trying to cut off oil pipeline flows. Maybe they'll decide to shut off gas supplies to some countries in Europe, as they've already done with Poland and Bulgaria.
CAHILL: And I think that Russia's also going to go to the OPEC+ countries and a lot of developing countries around the world, and a lot of them will be sympathetic to Russia, to be honest. I think the perception of much of the world is that, you know, the U.S. and the EU are going to drive up energy costs for the developing world, and it's going to create a lot of economic pressure right across the world. It's not just a European issue. This is a global oil market, and it's going to affect everyone.
FADEL: Now, if approved - excuse me - this ban, as proposed, as you mentioned, would be phased in. And what would that look like, and what might happen in the interim?
CAHILL: I think what will happen is that we're going to see a much bigger disruption, but it's going to take some time for countries to find alternative supplies. What we've seen in recent months, since, you know, the initial round of sanctions, is that Russia has tried to find alternative buyers for its crude and products, and it's been forced to sell those at a pretty deep discount. So you do have some countries, like India and China, that are taking advantage and buying cheaper volumes. You know, but, ultimately, it's really hard to replace a buyer on the scale of Europe. I mean, Russia's just not going to be able to do it. So, again, it will take time for this to happen. I think it's possible that, you know, in a couple months, you're going to have shortages, and it's really a recipe for much higher prices. You know, I think the market has actually been pretty quiet over the last month, but the scale of these sanctions - the import ban - is really going to shake up the market, and I think we're going to look at high prices for quite a long time to come.
FADEL: In the few seconds we have left, this would be part of a sixth wave of sanctions on Moscow imposed by the UA - EU, excuse me. How would you assess the impact of energy sanctions so far?
CAHILL: I think policymakers have concluded so far that the sanctions are creating enough economic pressure on Russia. They really want to ratchet it up. This is the most powerful way to do that. I do think that we are placing a little bit too much confidence in the impact of sanctions, and the big question to me is - what if they don't work?
FADEL: Ben Cahill...
CAHILL: Or what if they're in place for a long time and they don't have the economic impact we want them to?
FADEL: Thank you.
Ben Cahill is a senior fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies. Thank you.
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