Ursula von der Leyen, President of the European Commission said on Wednesday the measures would be part of a sixth round of sanctions against Russia for its invasion of Ukraine.
“We are now proposing a ban on Russian oil,” she said during a speech to the European Parliament. “Let’s be clear: it won’t be easy. But we just have to work on it. We will ensure that Russian oil is phased out in an orderly fashion, to maximize the pressure on Russia, while minimizing the impact on our own economies. “
Crude oil supply would be phased out within six months and imports of refined petroleum products by the end of 2022, she added.
News of the proposal, which has yet to be approved by all EU member states, sent crude oil prices soaring. Brent crude futures, the global benchmark, rose 2.4% to $107 a barrel, while U.S. oil futures rose 2.7% to $105 a barrel as of 3 a.m. 30 ET.
Oil prices have risen around 40% since the start of the year on fears that Russia’s invasion of Ukraine could cause a supply shock, fueling inflation and increasing pressure on economies Europeans.
Hungary recently reiterated its opposition to an oil embargo and Slovakia is reportedly requesting an exemption.
Russia is the world’s second largest exporter of crude oil and last year accounted for around 27% of EU oil imports. The United States, Canada, the United Kingdom and Australia have already banned imports.
These sanctions – and a de facto embargo imposed by some European oil refiners and traders – have already hit the price of Russian oil. Its benchmark Urals crude is now trading at a discount of $35 a barrel to Brent, from less than $1 before the invasion.
Some customers in Asia would buy more Russian oil, but not in sufficient quantities to compensate for the loss from Western buyers.
“Russia’s ability to redirect all unwanted cargo from the West to Asia is limited, which means that in the event of an embargo, Russia will be forced to further reduce production because it lacks storage capacity. for additional crude volumes,” Rystad Energy analysts wrote in a research report on Monday.
The International Energy Agency recently estimated that Russia’s oil supply will fall by 1.5 million barrels a day in April due to lower demand, with those losses accelerating to 3 million barrels per day this month.
But soaring world prices for oil and natural gas means Moscow continues to earn huge sums of money from its energy exports. Rystad estimates Russia will collect more than $180 billion in energy tax revenue this year — up 45% from 2021 — despite oil production cuts.
The Society for Worldwide Interbank Financial Telecommunication, based in Belgium, must comply with EU regulations. With no globally accepted alternative, this is essential plumbing for global finance.
“We hit banks that are systemically critical to the Russian financial system and Putin’s ability to wreak destruction,” von der Leyen said. “This will reinforce the complete isolation of the Russian financial sector from the global system.”
Three major Russian public broadcasters will also be banned from the European airwaves.
— Anna Cooban and Julia Horowitz contributed to this article.