Europe seeks to ban Russian oil as Putin cuts gas to Poland and Bulgaria

Russian President Vladimir Putin has taken action against Europe that could devastate it. But now the EU has retaliated with an unexpected embargo.

Russian President Vladimir Putin has cut off all gas supplies to Bulgaria and Poland in a move seen as both blackmail and punishment after Europe refused to pay for its gas in roubles.

But now Europe has retaliated with its own unexpected embargo.

Moscow tried to circumvent the harsh economic sanctions imposed during its invasion of Ukraine by insisting that all its natural gas exports be paid for in its own currency.

Until now, Europe has depended on Russia for around 45% of its natural gas imports – and 40% of its total gas consumption.

So, in a bid to take advantage, in March Mr Putin said that “unfriendly” foreign buyers should pay Gazprom in rubles instead of euros or US dollars.

Europe called its bluff, pointing out that there is no such “unfriendly” clause in Gazprom’s supply contract.

Two months later, when Bulgaria’s and Poland’s gas bills came due, they honored the signed agreement. So Mr. Putin turned off the taps.

Now the rest of Europe is wondering who will be next.

“Because all commercial and legal obligations are met, it is clear that at present natural gas is used more as a political and economic weapon in the current war,” said Bulgarian Energy Minister , Alexander Nikolav.

European Commission President Ursula von der Leyen was candid in her assessment of the situation.

“Gazprom’s announcement of a unilateral halt in the supply of gas to customers in Europe is yet another attempt by Russia to use gas as an instrument of blackmail.”

Now she has taken an unexpected retaliatory measure.

The European Union announced on Thursday its intention to ban imports of Russian crude oil within the next six months. This decision should be approved by the member countries of the Union in a few days.

“Let’s be clear, it won’t be easy,” Ms von der Leyen told the European Parliament in Strasbourg, France. “Some member states are heavily dependent on Russian oil. But we just have to work on it.

Global oil prices rose sharply soon after the announcement as nations rushed to secure non-Russian supplies.

Oils are not oils

“Putin must pay a price, a high price, for his brutal aggression,” Ms von der Leyen told the European Parliament. “Today we will propose to ban all Russian oil from Europe.”

But this price will have a price.

Since the fall of the Soviet Union in 1991, Europe’s attempts to work with its Eastern European neighbors have seen Europe become heavily dependent on Russian fossil fuels.

This includes about 27% of its crude oil imports and about 45% of its natural gas imports. It does not include refined products.

This means that a fossil fuel embargo will not be easy.

The EU banned Russian coal last month. But this was seen as a mere acceleration of a process already underway as part of climate change mitigation measures.

From now on, deliveries of crude oil will be prohibited, whether transported by European or Russian tankers.

The European Union had hoped to formalize the embargo on May 9, Victory Day in Russia, when the country celebrates victory over Nazi Germany in 1945. But the EU needs the unanimous support of its 27 member states.

This support remains in question.

Landlocked Hungary, led by pro-Putin Prime Minister Viktor Orban, is asking for an extension to source alternative supplies and says it will only accept the tanker embargo if its crude oil imports by pipeline are exempt. Slovakia wants a three-year transition period, as does the Czech Republic.

Natural gas, however, remains off the potential embargo list.

Large parts of Europe, especially in the north and east, use Russian natural gas as a heating source in winter and as fuel for its electric turbines.

And it’s Mr. Putin’s first – and last – point of economic leverage over his increasingly disgruntled neighbors.

“Zero-sum game”

Europe is hooked. Russia is dependent.

Natural gas – and the hard currency it earns – is critically important to both economies.

But the Kremlin’s decision last week to cut natural gas supplies to Bulgaria and Poland is seen as just the first disconnect in a long series.

European leaders are afraid to know who will be next.

During the critical winter months, the loss of such a crucial fuel for home heating could lead to the death of people from freezing. But as the northern summer approaches, concerns remain about its economic consequences.

Electricity may have to be rationed. Heavy industry will have to slow down.

“There is a sense of foreboding,” says Nikos Tsafos, an energy analyst at the Center for Strategic and International Studies (CSIS). “We don’t know who. We don’t know when.

Moscow’s main demand is that its European customers pay in rubles.

The contract he signed with them, however, specifies the euro.

And Russia, under new international sanctions, cannot convert them into hard currency.

Meanwhile, the EU has been juggling its own supplies to ensure Bulgaria and Poland don’t run out. Norway and Greece should make up any shortfall for them.

“Europeans can be sure that we remain united and in full solidarity with the Member States affected in the face of this new challenge. Europeans can count on our full support,” said Ms von der Leyen.

But the EU’s ability to absorb more such blows remains uncertain.

And that is Mr. Putin’s hope.

“Energy security in Europe is becoming a zero-sum game, where different European countries compete over a finite set of supplies,” Tsafos said. Foreign Police. “Poland and Bulgaria may be able to manage. But if it gets bigger, it becomes so much more difficult to manage.

Toxic gas

Russian gas exporter Gazprom had been at war for almost a year before the invasion, according to Atlantic Council Think Tank Analyst Alan Riley.

He reduced the availability of gas to deliberately harm European economies.

“Its role was to soften up the European Union by keeping natural supplies low and prices high before the conflict,” he says. “Moscow wanted to keep the Europeans vulnerable and therefore less likely to intervene when Russia invaded Ukraine.”

When the war broke out, Europe’s gas reserves were low and prices were extraordinarily high.

In December last year, gas storage reserves were at their lowest level in more than five years.

“Gazprom has made the situation even worse by emptying its own storage to fulfill its own contracts rather than importing more gas,” Mr Riley said. “This rapid emptying of storages left European gas storage dangerously low in the depths of winter, heightened market panic and further inflated gas prices.”

These were not business decisions, he adds.

While shortages and extreme prices have pushed up profits in the very short term, it has caused European customers to switch fuel or supplier – or close their doors.

Now, Mr Riley says, the EU has no choice but to acquire Gazprom and other Russian energy company assets in Europe and heavily regulate their activities.

“They therefore cannot be allowed to operate freely as ordinary commercial entities in the European market,” he says.

Jamie Seidel is a freelance writer | @JamieSeidel

Mary I. Bruner