Jim Urquhart/Reuters
- Banning Russian crude oil would be the easiest of the hard sanctions options for the EU, S&P Global’s Dan Yergin said.
- “The hardest thing of course, is natural gas,” he told CNBC Monday.
- Europe can rely on the US’ strategic crude oil stash instead of on supplies from Russia, the energy expert said.
A crude oil ban is the easiest option for the European Union as it looks to impose further energy sanctions on Russia without causing an energy crisis at home, according to top energy expert Dan Yergin.
The EU has already put forward a block on around $4 billion worth of Russian coal, and it said earlier in April it is working on additional proposals for sanctions, including on oil imports.
But the bloc gets one-quarter of its oil from Russia and is highly dependent on its gas, meaning it has to tread carefully.
“None of it is easy. But the one that is the easiest of the hard things is crude oil, because it’s a flexible market, and you can get other supplies,” Yergin told CNBC Monday, speaking about the bloc’s pending decision.
“The hardest thing, of course, is natural gas,” the S&P Global vice president said, pointing to Germany’s high reliance on Russian gas imports as a stumbling block.
Some member states have called for the EU to reduce and eventually end oil purchases from Russia, because the payments are seen as helping fund the Ukraine war. Germany’s purchases of Russian energy products are estimated to add about $220 million to the Kremlin’s balance sheet per day.
But a total phaseout could have drastic effects. An immediate ban on Russian gas imports could plunge Germany into a recession and dent its gross domestic product by 5%, the Bundesbank said recently. Its economy has relied for decades on Russia for energy, particularly the natural gas that’s shipped directly via the NordStream pipeline.
The EU gets about 3.5 million barrels of crude oil a day from Russia, according to figures from think tank Breugel. If Russia is cut out, the gap in the crude market would be 2 million barrels, so the bloc just has to figure out how to make that up, Yergin said.
“Europe gets about 3.5-3.8 million barrels a day from Russia. A substantial part of that is products like diesel and jet fuel, and things like that. So it’s really that 2 million barrels a day that you got to focus on,” he said.
The US government can be relied upon to help with issues around supply, Yergin pointed out. In March, it pledged to unleash 1 million barrels of oil a day for the next six months to counter price pressures linked to the Russia-Ukraine conflict.
“You have a million barrels a day that’s now coming from the Strategic Petroleum Reserve,” he said.
The US and UK have already placed embargoes on Russia’s energy industry, while the EU has said its states are reducing their reliance on its oil and gas as they explore sanctions. Energy exports are a major source of revenue for Russia, the world’s third-largest crude exporter.
But on Friday, Russia warned Europe that it could cut off gas supplies unless countries pay in rubles — a demand the EU has vowed not to accept.
Yergin recently predicted the US will emerge as the world’s largest natural-gas exporter this year.
“The one place you have growth is in the United States, which will see substantial growth in its oil, but not overnight,” he added. “It’s doable, but it takes a lot of coordination to make it happen.”
Top EU diplomat Josep Borrel told German newspaper Die Welt the bloc doesn’t have a unified position on fresh sanctions.
“A final proposal for an embargo on oil and gas is not yet on the table,” Borrel said, adding that this will be discussed at the next EU summit due at the end of May.
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