EU adopts Russian oil ban, targets insurance
The EU has officially adopted its sixth package of sanctions against Russia that includes an embargo on the country's oil and oil products, after the European Commission proposal was negotiated and agreed by member states. Critically, the package also prohibits EU companies insuring and financing the transport of Russian crude, which will make it harder for Russia to deliver its exports elsewhere in the world.
In its final form, the ban means that in six months' time, European companies will no longer be able to buy seaborne crude oil shipments from Russia, either on the spot market or under existing contracts. The same will apply to petroleum product supplies in eight months' time.
Pipeline imports from Russia will still be permitted, in a compromise to Hungary and other central European countries heavily dependent on oil deliveries via Russia's Druzhba oil system. However, those countries will not be able to resell any of these supplies to other member states or third countries.
Furthermore, Bulgaria has been given until the end of 2024 to comply with the seaborne oil ban, "due to its specific geographical exposure," while Croatia will still be able to import the Russian vacuum gas oil it needs for its refineries to function until the end of 2023.
Critically, within six months EU companies will also be barred from insuring and financing the transport of Russian seaborne oil exports to third countries.
"This will make it difficult for Russia to continue exporting its crude oil and petroleum products to the rest of the world since EU operators are important providers of such services," the commission said in its statement on June 3.
The commission noted that last year the EU imported some €48bn worth of crude oil and €23bn of refined oil products from Russia.
The ban will put further upward pressure on oil prices, which have been creeping up steadily in recent weeks, with Brent now trading at $120/barrel. OPEC+'s decision last week to bring more barrels back to the market over the coming months than previously expected failed to stem this growth. The oil cartel agreed in a meeting on June 3 to raise output by 648,000 barrels/day in July and 648,000 b/d in August.