Despite not directly targeting Russian oil and gas exports, the European Union’s energy policy leader said on Thursday that sanctions placed on Russia over its invasion of Ukraine would progressively reduce Moscow’s oil income.
The EU’s 27-country bloc has placed a slew of sanctions on Russia, including a prohibition on the sale of specific refining technologies from Europe to Russia, making modernizing Russia’s oil refineries more difficult and expensive.
“These technologies are created in Europe; other suppliers will not be able to readily place them globally,” stated European Commissioner for Energy Kadri Simson.
“As a result, we will see a gradual depletion of income from refined oil, which provided 24 billion euros in revenue for Russia in 2019,” she told a European Parliament committee.
Last year, Russia’s oil and gas sales accounted for 36% of the country’s entire budget, greatly exceeding original estimates due to surging prices.
The EU sanctions do not target Russia’s oil and gas exports specifically. This would not only deprive Moscow of a big portion of its earnings, but it would also have a significant economic impact on Europe, perhaps driving up already high petrol costs.
90% of Europe’s gas is imported, with 40% of it coming from Russia.
Due to increased liquefied natural gas imports and reasonably healthy storage levels, the EU believes it will be able to cope with a partial disruption in Russia’s gas flows this winter.
However, analysts have cautioned that a complete or lengthy halt in Russian supplies would necessitate emergency steps to reduce demand, such as industry closures. All EU countries have prepared contingency plans to deal with gas supply disruptions.
Since the invasion, Russian gas shipments to Europe have remained stable, while prices have risen due to fears of a supply disruption. Gas exports through Ukraine are in accordance with customer requests, according to Russian energy giant Gazprom.