When will Europe deprive Putin's war machine of its fuel?

5 May, 07:05 PM

The European Union's oil embargo under the sixth package of sanctions against Russia is one of the key steps to limit Putin's ability to finance his war against Ukraine.

A true partnership is based on several principles. One of them is to never demand more from your partners than you are willing to do yourself.

In fact, since February 24, the issue of the European embargo on Russian energy, in particular oil, has become the main focus of Ukrainian energy diplomacy. We are aware of the price Europeans will have to pay. Gasolinehas risen in price – and keeps on rising. Compared to the beginning of the year, gasoline at European gas stations went up by 15-30 eurocents.

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No one likes to pay more and consume less. But we are not talking about gasoline, and not even about the economy as such. There are thousands of lives that can be saved if Putin's military machine loses its "fuel."

The math of this war is simple. In 2021, the European Union paid Russia about EUR 88 billion for energy. In particular, almost EUR 70 billion for oil and petroleum products. Russia's military budget in the same year amounted to EUR 62.5 billion. The Kremlin can fully fund its military-industrial complex by selling energy to Europe – and there will still be tens of billions left over for additional weapons. Today, this money, embodied in planes, missiles and tanks, is killing Ukrainians and destroying our country.

Therefore, the EU's ban on Russian energy imports goes far beyond the inconvenience of rising prices at gas stations. The oil embargo that the European Union is considering as part of its sixth package of sanctions against Russia would be a key step in limiting Putin's ability to finance his war. First, the supply of oil transported by tankers will be cut. By the end of the year, the embargo will also apply to pipeline oil.

Thus, the EU member states will join those countries that have already given up Russian oil – the United States, United Kingdom, Canada and Australia. This will be an important sign of solidarity from the European Union. 

Unfortunately, it is not unanimous. There are still countries within the bloc that are ready to "pay" for their own political interests with the lives of Ukrainians and the security of their citizens. Still, Europe is dominated by the understanding that the Kremlin poses a threat to continental and global security. And the fuel of Russian revanchism is energy resources.

The Putin regime feeds on money from energy exports. It was this money that inflated Russia's imperial revanchist drive, and its military budget, and as a result sparked a large war in Europe.

Preparation for the embargo. Doubts, bargaining, and determination

Since the beginning of the invasion, the issue of banning energy imports from Russia to the EU has been a major focus of Ukrainian energy diplomacy. Oil is the second step in this direction, after coal. For the European Union, abandoning Russian hydrocarbons is a matter of political will, not survival. Where there is a will, there is a way – and this is confirmed in the ongoing debate over the oil embargo.

About 25% of the EU's oil imports come from Russia. A quarter of total imports does not seem critical, but there are countries where the share of Russian oil ranges from 50% to 80%. These are Poland (58%), Slovakia (73.6%), Finland (79.6%), and Lithuania (82.6%).

At the same time, the issue of the embargo stalled not because of them, but because of other states. In particular, Germany (where the share of Russian oil in imports recently stood at 35% and has now fallen to 12%) and Hungary, where 65% of the oil it consumes comes from Russia.

Regarding the introduction of a new sanctions package, Hungarian politicians generally say they will block the oil embargo. This is not the first time that the position of Budapest has contradicted the position of Brussels – before that the Hungarian government said it was ready to pay for Russian gas in rubles, if necessary, which dented the EU’s sanctions policy against Russia.

The Hungarian government is trying to play the game of "business as usual," saying that Hungarians should not experience a deterioration in their welfare due to sanctions on Russian energy. Even disregarding the moral aspect of this approach (against the background of thousands of killed, raped, tortured Ukrainians, against the background of Bucha, Borodyanka, Kharkiv, Chernihiv, Mariupol and hundreds of other cities and towns destroyed by the war), the economic consequences for Europeans will not be critical. 

According to the participants of the conference on the EU sanctions on April 4, the impact on the economy of the 27 EU member states on average will be moderate: it will be equal to a decrease in income by 0.2-0.3% or about EUR 100 per adult European.

Hungary's position contrasts sharply with that of Poland. Although Poland imports about 60 percent of Russia's oil, the government has not only announced the abandonment of all Russian energy resources by the end of this year, but has become one of the faces of the European sanctions policy against Russia.

Peace, or the opportunity to turn on the air conditioning?

Perhaps this colossal difference in world-view was best expressed by Italian Prime Minister Mario Draghi, who asked the European community what it wants — peace, or the opportunity to turn on the air conditioning?

Progress on the oil embargo was made possible by a change in the position of Germany, the EU's biggest economy, where Russian oil used to account for a third of imports. Vice Chancellor Robert Habeck said that "a problem that only a few weeks ago seemed very big to Germany has become much smaller."

The federal government has been able to reduce the share of Russian oil to 12%, minimizing the consequences for the German economy from the embargo. France, the EU's second-largest economy, said a few weeks ago that it would support an oil ban.

Germany was also probably affected by the fact the Russia was brazenly blackmailing the EU over energy: on April 26, Russian gas company Gazprom cut off gas supplies to Poland and Bulgaria in response to the refusal of countries to pay for supplies in rubles.

On May 3, Russian dictator Vladimir Putin went even further and issued a decree on sanctions against "unfriendly countries and organizations," which prohibits Russian companies from fulfilling their obligations under existing contracts and concluding new ones with those on a "sanctions list". The list as expected includes the United States, but it also remains open to new additions.

In essence, this allows the Kremlin to accuse anyone of unfriendliness and unilaterally cut off supplies of oil products and raw materials, despite existing agreements. Obviously, this primarily concerns energy. And it is clear that such a decree will run roughshod over any contractual obligations.

These events only confirm the correctness of the arguments and approaches taken by Ukrainian energy diplomacy. As long as Europe is dependent on Russian energy, the Kremlin will use it as a weapon, putting pressure on European governments and undermining the unity of the European Union.

At the same time, the idea that there is no alternative to Russia's energy resources is merely one of the myths of Kremlin propaganda. Along with the myth of the "second army of the world." In fact, the situation is somewhat the opposite: the rejection of Russia's energy resources (including oil) puts the Kremlin in an impossible position. Even if Russia tries to refocus on the Asian market, it will have to offer its oil at great discounts due to a shortage of tanker and pipeline capacity and a general atmosphere of "toxicity." This will reduce its ability to finance its war.

Moreover, signals from China and India are currently hardly reassuring for Putin: Chinese state-owned refineries are avoiding new contracts, even for cheaper Russian oil, for fear of Western sanctions. Indian Oil also excluded several high-sulfur oil brands from its latest tender, including Russia's Urals.

The imposed oil embargo will send a clear signal to producers — the United States, Qatar, OPEC members — that a niche of about EUR 70 billion a year has become available in the huge European market. Gradual oil sanctions will allow exporting countries to increase their production and start competing for long-term European contracts.

Kremlin's shady dealings

However, we must be prepared for the fact that even after the embargo, Russia will try to promote its oil on the European market by resorting to shady dealings.

According to Politico, the Russian Urals oil is already being renamed. Traders report the aggressive appearance on the market of new oil blends with geographical identifiers such as "Turkmen" – which is probably a disguise for oil mixed with Russian oil.

The Wall Street Journal also reports that Russia has increased oil supplies to key consumers in recent weeks. One of the methods of delivery is transportation by tankers marked "unknown destination." In addition, the transshipment of oil is occurring in neutral open waters, resulting in the "remarketing" of Russian oil.

Tanker Trackers estimated that in April, about 455,000 barrels of Russian oil arrived in European ports every day, and the ship's final location was marked as "unknown destination" in order to conceal potential buyers. A total of 11.1 million barrels were loaded under this scheme in April.

It is obvious that after the introduction of the embargo, the number of schemes will increase significantly – and these will also need to be counteracted so that sanctions do not lose their effectiveness.

Europe without a carbon footprint and wars

The abandonment of Russian energy will be an important step for the European Union towards peace in Europe.

The crisis provoked by Russia has shown that the EU's policy on decarbonisation and rejection of hydrocarbons is not only justified — it must be implemented as soon as possible. The war does not put the goals of the EU Green Deal on hold. On the contrary, it requires urgent decisions on the replacement of hydrocarbons in energy (nuclear, renewable energy sources), transport (biogas, electric transport) and manufacturing (electricity from clean sources and hydrogen). 

And Ukraine is ready to be a reliable partner of the EU in these matters: From carbon-free electricity, which is now 70% of our energy mix that we can supply to Europe, to the use of national capacity in hydrogen production and transportation.

Despite the Kremlin's bravado, sanctions could undermine Russia's ability to wage war — not just on the European continent, but anywhere in the world. That is why Russian Foreign Minister Sergei Lavrov indulges in wishful thinking when he says that the subject of peace talks between Ukraine and Russia is also the lifting of sanctions.

Sanctions are "off the table" in negotiations, as is the territorial integrity of Ukraine. And they will not be the subject of any discussions as long as the aggression continues.

The economic price we will have to pay for giving up Russia's energy resources is nothing more than an investment in global security. After all, it was hydrocarbon money that fed the vultures of the wars that Russia has waged for the past 14 years.

In 2008, this became apparent to Georgia. In 2014 – to Ukraine. Today it has become obvious to the whole civilized world.

"We are imposing sanctions to make military action by Russian forces in other regions impossible in the coming years." This statement of Annalena Baerbock, the Minister of Foreign Affairs of Germany, should become a prologue to the new geopolitical reality.

But not the one Putin dreams of — with a medieval empire stretching from Vladivostok to Lisbon. Instead, it must be one where the violation of international law by a state will lead to isolation and economic abyss. 

Quickly, and without exceptions.

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