London (CNN Business)Europe will consider joining a US-led embargo of Russian oil this week as the West looks for new ways to punish President Vladimir Putin for waging his devastating war in Ukraine.
At a series of meetings beginning Monday, EU leaders will discuss whether to dump by far the biggest supplier of oil to the region, having already committed to cutting Russian natural gas use by 66% this year. They’ll be joined by US President Joe Biden at a summit on Thursday.
“We have to discuss how we can support Ukraine even further, politically, economically, with humanitarian aid, security wise, everything is on the table. So we can ensure that we will do what we can to stop Putin and his aggression against Ukraine,” Denmark’s foreign minister Jeppe Kofod told reporters. “It’s important with economic sanctions to continue along that track.”
Russia is the world’s second biggest exporter of oil, behind Saudi Arabia, and despite the chilling effect of unprecedented Western financial sanctions and an embargo announced by the United States and the United Kingdom, it continues to earn hundreds of millions of dollars a day from energy exports.
“I think it is unavoidable to start talking about the energy sector. And we definitely can talk about oil, because it is the biggest revenue to the Russian budget,” Lithuania’s foreign minister Gabrielius Landsbergis said as he arrived in Brussels for a meeting with his EU counterparts.
Other EU states support the idea of hitting Russia’s most valuable asset with sanctions.
“Looking at the extent of the destruction in Ukraine right now, it’s very hard — in my view — to make the case that we shouldn’t be moving into the energy sector, particularly oil and coal, in terms of interrupting normal trade in that space,” said Irish foreign minister Simon Coveney.
The European Union currently depends on Russia for about 40% of its natural gas. Russia also supplies about 27% of oil imports, and 46% of coal imports.
What will Germany do?
Earlier this month, EU leaders said the bloc couldn’t yet join the United States in banning Russian oil, because of the impact that would have on households and businesses already grappling with record high prices. Instead, they said they would work toward a deadline of 2027 for ending the bloc’s dependency on Russian energy.
There’s also a risk that Russia could retaliate by restricting exports of natural gas. Deputy Prime Minister Alexander Novak said this month that Moscow could cut off the supply of gas to Germany via the Nord Stream 1 pipeline as retribution for Berlin blocking the new Nord Stream 2 pipeline project.
Even without an EU embargo — and any potential Russian counter — the world is facing its biggest energy supply shock in decades, according to the International Energy Agency. It said last week that Russia could be forced to curtail crude oil production by 30% starting next month because of slumping demand.
Canada, the United States, the United Kingdom and Australia have already banned imports of Russian oil, affecting roughly 13% of Russia’s exports. And moves by major oil companies and global banks to stop dealing with Moscow following the invasion are forcing Russia to offer its crude at a huge discount.
The Paris-based IEA, which monitors energy supplies for the world’s leading developed economies, said Russian output could drop by 3 million barrels per day.
“The implications of a potential loss of Russian oil exports to global markets cannot be understated,” the IEA said in its monthly report.
Still, despite the challenges of finding alternative suppliers and protecting businesses and consumers from soaring prices, political opinion may be hardening in Europe as Russia steps up its attacks on Ukraine’s cities, killing hundreds of civilians and forcing millions to flee their homes.
Much will come down to countries like Germany, Russia’s biggest energy customer in Europe, as well as others that buy a lot of its gas, such as Hungary and Italy.
“I think that the German public is doing a lot of convincing to the German government,” said Landsbergis, when asked if Berlin could be convinced to ban Russian oil. “And so far, they have been quite successful in that. I hope that they will continue.”