EU's Russian Oil Ban to Rock Market

Nearly a month after it was proposed, EU leaders have agreed to ban 90% of the bloc’s imports of Russian crude and oil products by the end of 2022, with carveouts for a few landlocked countries. The historic move against one of the world’s top producers — Russia accounted for a quarter of the EU’s crude imports alone last year — requires an acceleration of the energy transition and will dramatically reconfigure global oil flows. It also risks fuel shortages and acute price pain over the summer, with Brent swelling above $120 per barrel even before Monday’s agreement. But EU leaders ultimately deemed those risks necessary “to stop Russia’s war machine.” The deal to ban seaborne oil imports is a compromise that was needed essentially to placate Hungary, Moscow’s closest ally in the EU, and secure the unanimity of all 27 members. Landlocked Hungary, Slovakia and the Czech Republic import Russian crude via the Druzhba pipeline and are temporarily exempt, while Bulgaria can continue seaborne imports until end-2024. But these exemptions, at around 400,000 barrels per day, are a small fraction of the total 2.2 million b/d of crude that the EU imported from Russia last year, in addition to 1.15 million b/d of products. Germany and Poland, which also receive crude through the Druzhba line, have committed to phasing out all their Russian oil imports by year's end. “Now, we have basically the political agreement, how to phase out [Russian] oil in a clear timeframe,” European Commission President Ursula von der Leyen said, adding that the Druzhba loophole would be addressed "as soon as possible."