The EU is set to impose sanctions on Russia’s seaborne crude oil imports on Monday, while experts voice supply concerns as 1.1 million barrels per day (bpd) of Russian oil is expected to go unsold, reports AA.
Russia-Ukraine conflict
To restrain Russia’s economy due to its conflict with Ukraine, the EU decided on June 3 to suspend purchases of Russian crude oil beginning Dec. 5, despite its heavy reliance on Russian hydrocarbon products. The EU will also stop importing petroleum products from Russia on Feb. 5.
Just one month prior to the start of the Russia-Ukraine war that erupted on Feb. 24, the bloc had been importing 2.4 million bpd of crude oil and 1.4 million bpd of oil products from Russia.
The sanctions, which are expected to further deepen the EU’s energy crisis, will be temporarily on hold for some landlocked countries, including Hungary, Slovakia and Czechia. These countries will be allowed to import Russian crude oil via the Druzhba pipeline, although they will not be able to sell the oil they buy to other member countries or third parties.
Bulgaria has been exempted and is permitted to import Russian crude by sea until the end of 2024 because its refinery is designed to process Russian crude oil only.
Croatia was also awarded a partial exemption to continue providing vacuum gas oil—a type of heavy diesel fuel—for the operation of its refinery in the city of Rijeka.
Germany and Poland voluntarily halted imports through the Druzhba oil pipeline despite the granted exemption. The sanctions are estimated to reduce the EU’s oil imports from Russia by around 90%.
Sanctions on Russian oil
Sanctions on Russian oil were further expanded, encompassing restrictions on the transportation of Russian oil to third countries.
In addition to these import bans, the EU and G7 countries are agreed to impose a $60 per barrel price cap on Russian seaborne oil, which will also enter into force on Dec. 5 and will be reviewed every two months.
The parties will ensure that the Russian price cap is set at least 5% below the market price of crude oil.
Ban on insurance
The EU sanctions also include a ban on providing insurance on other services for vessels carrying Russian oil. The majority of these insurance companies are based in the EU or the UK.
The sanctions aim to limit the markets in which Russia is permitted to trade.
Shipping services and insurance are only permitted for tankers transporting Russian oil purchased at or below the oil price cap established by the Western countries.
According to independent research company Rystad Energy, if the sanctions are fully implemented, only 600,000 bpd of Russian oil is estimated to reach the EU by January 2023.
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Source: AA
