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The Case for and against EU Sanctions on Russian Oil

A large European Union flag lies at the center of Schuman Square outside European Commission headquarters in Brussels, Belgium, May 8, 2021. (Reuters)
A large European Union flag lies at the center of Schuman Square outside European Commission headquarters in Brussels, Belgium, May 8, 2021. (Reuters)
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The Case for and against EU Sanctions on Russian Oil

A large European Union flag lies at the center of Schuman Square outside European Commission headquarters in Brussels, Belgium, May 8, 2021. (Reuters)
A large European Union flag lies at the center of Schuman Square outside European Commission headquarters in Brussels, Belgium, May 8, 2021. (Reuters)

European Union countries on Thursday approved a ban on Russian coal imports from August as part of new measures against Moscow, but are split over whether oil or gas sanctions should follow.

The coal embargo is the EU's first energy sanction against Moscow following its invasion of Ukraine. Officials say the bloc will now discuss sanctions on oil, which represent far bigger imports from Russia than coal.

However, not all countries are on board, with some like Germany and Hungary fearing the economic impact even though civilian killings in Ukraine have increased Europe's resolve to punish the Kremlin.

Russia denies allegations that it has targeted civilians in what President Vladimir Putin calls a "special military operation" to disarm Ukraine.

Here are arguments for and against sanctioning Russian oil.

The case for oil sanctions
Ukraine and EU states including Poland and Lithuania want a ban on Russian oil and gas. Oil is Russia's most lucrative energy export, and blocking it would deprive Moscow of a major revenue stream those countries complain is funding the war.

EU lawmakers on Thursday approved a non-binding resolution for an immediate embargo on Russian energy imports.

Oil and oil products made up more than a third of Moscow's export revenues last year. Currently, Europe spends around $450 million per day on Russian crude oil and refined products, around $400 million per day for gas, and roughly $25 million for coal, according to think-tank Bruegel.

In theory, producers such as Saudi Arabia and the United Arab Emirates have enough spare capacity for Europe to replace the Russian oil it buys, which is roughly half of Russia's total crude exports of 4.7 million barrels per day. However, producer group OPEC+ has so far only committed to incrementally increase output.

The terms of any oil embargo could determine its support among EU states, with options for flexibility including a transition period - like the four-month phase-in agreed for the EU's Russian coal sanctions - or carve-outs for specific products, such as the 10% of Europe's diesel that comes from Russia.

Some countries have suggested halfway measures that would not ban Russian oil purchases, but would withhold some payments for it.

Estonian Prime Minister Kaja Kallas - who supports oil and gas sanctions - last week asked the European Commission to propose skimming off a share of Europe's payments for Russian fossil fuels and placing them in a third-party account instead of sending them to Moscow, effectively imposing a tariff on such imports.

The case against oil sanctions
Germany and Hungary are opposed to an immediate oil embargo, which Berlin has said would risk German economic and social stability.

Russia is Europe's biggest oil supplier, providing 26% of EU oil imports in 2020. Europe gets roughly a third of its gross available energy from oil and petroleum products, in sectors from transport to chemicals production.

Sanctioning Russian supply could push up already-high oil prices, which soared to a 14-year peak last month. Germany, Sweden, France and Italy have announced subsidies to shield motorists from high prices - moves criticized by climate campaigners as fossil fuel subsidies.

Brent crude prices could be around 21% higher on average in 2022 under EU oil sanctions, compared with a reference case where voluntary "self-sanctioning" by companies caused a smaller shut-in of Russian supplies, according to the Oxford Institute for Energy Studies.

The price impact of sanctions would also depend on factors including releases of strategic oil reserves aimed at cooling prices.

Brent crude futures were last trading 0.8% up on Friday at $101.36.

Another concern is that EU oil sanctions could see Russia retaliate by also cutting off the 40% of EU gas it supplies.

Gas sanctions are seen as the last resort in the EU's package of potential energy measures, because of the dependence of European industries and home heating on the fuel, plus the challenges Europe would face to replace Russian supply in a tight global gas market and with limited infrastructure for importing more liquefied natural gas.

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On Lebanon Border, Israel and Hezbollah’s Deadly Game of Patience

Smoke is seen as an unmanned aerial vehicle (UAV) is intercepted following its launch from Lebanon, amid cross-border hostilities between Hezbollah and Israeli forces, at Kibbutz Eilon in northern Israel, July 23, 2024. (Reuters)
Smoke is seen as an unmanned aerial vehicle (UAV) is intercepted following its launch from Lebanon, amid cross-border hostilities between Hezbollah and Israeli forces, at Kibbutz Eilon in northern Israel, July 23, 2024. (Reuters)
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On Lebanon Border, Israel and Hezbollah’s Deadly Game of Patience

Smoke is seen as an unmanned aerial vehicle (UAV) is intercepted following its launch from Lebanon, amid cross-border hostilities between Hezbollah and Israeli forces, at Kibbutz Eilon in northern Israel, July 23, 2024. (Reuters)
Smoke is seen as an unmanned aerial vehicle (UAV) is intercepted following its launch from Lebanon, amid cross-border hostilities between Hezbollah and Israeli forces, at Kibbutz Eilon in northern Israel, July 23, 2024. (Reuters)

In deserted villages and communities near the southern Lebanon border, Israeli troops and Hezbollah fighters have watched each other for months, shifting and adapting in a battle for the upper hand while they wait to see if a full scale war will come.

Ever since the start of the Gaza war last October, the two sides have exchanged daily barrages of rockets, artillery, missile fire and air strikes in a standoff that has just stopped short of full-scale war.

Tens of thousands have been evacuated from both sides of the border, and hopes that children may be able to return for the start of the new school year in September appear to have been dashed following an announcement by Israeli Education Minister Yoav Kisch on Tuesday that conditions would not allow it.

"The war is almost the same for the past nine months," Lieutenant Colonel Dotan, an Israeli officer, who could only be identified by his first name. "We have good days of hitting Hezbollah and bad days where they hit us. It's almost the same, all year, all the nine months."

As the summer approaches its peak, the smoke trails of drones and rockets in the sky have become a daily sight, with missiles regularly setting off brush fires in the thickly wooded hills along the border.

Israeli strikes have killed nearly 350 Hezbollah fighters in Lebanon and more than 100 civilians, including medics, children and journalists, while 10 Israeli civilians, a foreign agricultural worker and 20 Israeli soldiers have been killed.

Even so, as the cross border firing has continued, Israeli forces have been training for a possible offensive in Lebanon which would dramatically increase the risk of a wider regional war, potentially involving Iran and the United States.

That risk was underlined at the weekend when the Yemen-based Houthis, a militia which like Hezbollah is backed by Iran, sent a drone to Tel Aviv where it caused a blast that killed a man and prompted Israel to launch a retaliatory raid the next day.

Standing in his home kibbutz of Eilon, where only about 150 farmers and security guards remain from a normal population of 1,100, Lt. Colonet Dotan said the two sides have been testing each other for months, in a constantly evolving tactical battle.

"This war taught us patience," said Dotan. "In the Middle East, you need patience."

He said Israeli troops had seen an increasing use of Iranian drones, of a type frequently seen in Ukraine, as well as Russian-made Kornet anti tank missiles which were increasingly targeting houses as Israeli tank forces adapted their own tactics in response.

"Hezbollah is a fast-learning organization and they understood that UAVs (unmanned aerial vehicles) are the next big thing and so they went and bought and got trained in UAVs," he said.

Israel had responded by adapting its Iron Dome air defense system and focusing its own operations on weakening Hezbollah's organizational structure by attacking its experienced commanders, such as Ali Jaafar Maatuk, a field commander in the elite Radwan forces unit who was killed last week.

"So that's another weak point we found. We target them and we look for them on a daily basis," he said.

Even so, as the months have passed, the wait has not been easy for Israeli troops brought up in a doctrine of maneuver and rapid offensive operations.

"When you're on defense, you can't defeat the enemy. We understand that, we have no expectations," he said, "So we have to wait. It's a patience game."