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EU Parliament Endorses Oil Ban Despite Divisions

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Members of the European Parliament have called for a ban on imports of Russian oil, gas and coal, putting more pressure on EU leaders to act as they gathered in Versailles, France, on Thursday and Friday.

Up to 100 parliamentarians called for an immediate ban on Russian imports, citing a resolution adopted in April 2021 that if Russia were to invade Ukraine the EU should immediately cease oil and gas imports.

They also called on EU leaders to expand financial sanctions so that all Russian banks are banned from the international financial messaging system Swift. As things currently stand, Gazprombank remains exempt.

As part of the two-day summit leaders are expected to agree to phase out the EU's dependence on imports of Russian gas, oil and coal, without a fixed date, according to a draft statement obtained by Reuters.

The summit is expected to build on a proposal presented earlier this week by the European Commission, which believes the EU can replace 100 billion cubic meters of Russian gas this year by increasing imports of pipeline gas and LNG from other countries as well as increasing the use of biomethane and renewable hydrogen.

Russia accounted for 45% of the EU's total gas imports last year.

The short-term goal of securing additional supply from Europe’s other suppliers — Norway (23%), Algeria (12%), the US (6%), Qatar (5%) and others — has yet to translate into firm commitments.

Any plan to reduce Russian volumes is contentious because EU member states disagree on a timeline for implementation.

Poland and the Baltic states of Lithuania, Latvia and Estonia are in favor of an embargo to step up pressure on Moscow.

But so far, Germany and Hungary have been reluctant to go along with a complete EU ban, saying that Europe would not be able to wean itself off Russian energy overnight.

Russia also accounts for 24% of Europe's crude oil imports.

Major oil companies like TotalEnergies and Shell plan to cut their reliance on Russian crude in their European downstream operations, but some refineries in Central and Eastern Europe are almost wholly dependent on Russian imports.

With little potential for a short-term supply fix for either oil or gas, Europe may have to start rationing energy, especially if high oil prices continue to fuel inflation.

“It is no coincidence that the US is not pushing the EU to follow suit [with a ban]; the impact would be severe for both of them as oil prices would certainly rally under this scenario,” said PVM Oil analyst Tamas Varga.

Topics:
Oil Supply, Gas Supply, Sanctions, Military Conflict, Ukraine Crisis
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