/ 01 June 2022

Hitting Russia where it hurts

Ursula von der Leyen President of the European Commission held a press conference with Charles Michel President of the European Council while answering questions to the media, after the special EU summit on May 30, 2022, having a blue screen background with the flag of Europe and symbol of the council.
Special Meeting of the EU leaders, the European Council in Brussels, Belgium on May 31, 2022 (Photo by Nicolas Economou/NurPhoto via Getty Images)
Ursula von der Leyen President of the European Commission held a press conference with Charles Michel President of the European Council while answering questions to the media, after the special EU summit on May 30, 2022, having a blue screen background with the flag of Europe and symbol of the council. Special Meeting of the EU leaders, the European Council in Brussels, Belgium on May 31, 2022 (Photo by Nicolas Economou/NurPhoto via Getty Images)

THE SQUIZ
In the harshest economic sanction levelled against Russia since it invaded Ukraine in February, the European Union will ban most imports of Russian oil. The deal stops Russian oil imports from arriving by sea by the end of the year, which will cut off more than 70% of the EU’s total imports. The move will cost Russian oil producers and President Vladimir Putin’s government billions of dollars a year, and it sees the EU severe another tie.

BUT DOESN’T RUSSIA HAVE PIPELINES INTO EUROPE?
It does. But European Commission President Ursula von der Leyen said Germany and Poland have volunteered to wind down their oil pipeline imports from Russia by the end of this year. She says what’s left over “is around 10-11%,” referring to the Russian pipeline supplying oil to Hungary, Slovakia and the Czech Republic. The exemption for piped oil came after a protest from Hungary, which is heavily dependent on Russian oil. Note: no sanctions on the supply of Russian gas have been included yet, although nations must not give in to Russia’s demands to pay in roubles. That’s seen Russia cut supply to Poland, Bulgaria, Finland, and now the Netherlands, and others are expecting to be cut off soon.

SO WHY IS THIS A BIG DEAL?
Well… Russia currently supplies 27% of the EU’s imported oil and 40% of its gas. So getting 27 nations to agree to sanctions that will damage their economies under the banner of standing up for Ukraine is an achievement. With EU nations paying Russia about $600 billion a year for those fuels, it’s no wonder European Council chief Charles Michel says yesterday’s deal cuts off a big whack of revenue that’s helping to fund Russia’s war machine. But it’s not easy for EU nations to implement because, like here in Oz, the cost of living crisis/massive energy price hikes are hurting citizens and economies wanting to bounce out of the pandemic. The move also poses questions for Australia with global gas and oil prices surging. Analysts say it means petrol prices will stay above $2/litre, and wholesale gas prices will continue to surge. Ai Group boss Innes Willox describes it as “apocalyptic” for business and consumers.

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