In response to Moscow’s invasion of Ukraine on the night of Wednesday 23 to Thursday 24 February, EU Member States are trying to put pressure on the Kremlin, including in the energy sector.
As we went to press on Friday 25 February, the Foreign Ministers of the Member States were preparing to adopt an unprecedented series of sanctions agreed by the 27 Heads of State or Government on 24 February at an extraordinary meeting of the European Council (see EUROPE 12898/1).
One of them is to ban the export to Russia of equipment and technology needed to upgrade USSR oil refineries to Euro-6 standards.
According to the President of the European Commission, Ursula von der Leyen, refined oil brought Russia €24 billion in export revenues in 2019, and the equipment needed to refine the oil comes from Europe and cannot be replaced.
Asked by EUROPE about the impact of such a measure on the Russian economy, Arild Moe, a lecturer at the Fridtjof Nansen Institute (FNI) and an expert on energy issues related to Russia, said it “might be of some importance over time, but definitely not in the near future”.
“Russian refineries would probably have limited possibilities for modernisation, so they will be less efficient and less profitable over time”, he said.
Nevertheless, it does not seem to him to “represent a major obstacle to Russia’s economic development”.
An EU embargo on Russian oil and gas?
Criticising the weakness of EU sanctions, some are calling on the EU to go further on energy, a key sector of the Russian economy.
This is the case for Thomas Pellerin-Carlin, Director of the Energy Centre of the Jacques Delors Institute, for whom the sanctions should target Russian gas and oil deliveries to the EU.
“A European embargo on Russian oil and gas is technically possible, economically and politically difficult, but feasible. It is a political choice that we made in 2012 to force Iran to negotiate successfully", he said.
In his view, this would be a really effective measure, given the revenues that these deliveries provide to Russia.
In 2020, the EU spent around €60 billion on fossil fuels from Russia, according to data fromEurostat, the EU’s statistical office.
This figure could also be higher in 2022 due to the increase in the price of gas.
Arild Moe, on the other hand, considers an EU embargo on Russian gas and oil supplies to be highly unlikely, due to the overdependence of some Member States, such as Germany, on energy.
“EU countries are faced with a dilemma because of their dependence on energy, especially natural gas but also oil”, he summarised.
In the first half of 2021, Russian deliveries accounted for 46.8% of total EU gas imports and 24.7% for oil.
For Mr Pellerin-Carlin, the issue is therefore above all “geopolitical”: “It is a question of what the EU is prepared to do to reduce the revenues that Putin uses to finance his various activities, including the invasion of Ukraine. At present, our immoderate consumption of fossil fuels is used to finance the Russian army”.
He went on to add: “On a scale of 0 to 100 to assess the strength of sanctions on the energy sector, 100 would be an immediate embargo on all fossil fuels imported from Russia. Currently, the cursor is set at 1”.
According to him, the Union has enough other levers in the energy field (energy sobriety and efficiency, rationing, rapid deployment of renewable energies, stocks, liquefied natural gas, etc.) to do without Russian gas until next winter, without this having “traumatic impacts on the European economy, since it will soon be March and therefore the end of winter”.
“But the question would be to know to what extent we are able to mobilise all these levers as a matter of urgency in the next six or seven months”, he subsequently specified. (Original version in French by Damien Genicot)