The EU energy embargo imposed on Russia: is it working?

Translated by Elisa Bruni

After Russia invaded Ukraine on February 24, 2022, the European Union reacted promptly, although not always unanimously, sanctioning the Russian energy sector, often targeted since it is considered the fuel of Putin’s war machine.

The sanctions and the embargo

Sanctions imposed by the EU after the invasion affected Russia’s energy sector the most. First of all, the ban on any type of coal importation from Moscow impacted approximately 25% of Russian coal global exports, leading to an €8 billion revenue loss for Russia.

Amongst other measures, one in particular has been widely discussed: the ban on crude oil and refined oil products imported by sea from Russia. In order to understand the extent of the economic sanctions, we should examine the market value as it was before the invasion: in 2021, the European Union imported oil for a total of €71 billion (of which €48 billion of crude oil and €23 billion of refined oil products). In addition, it was established with the countries of G7+ that a fixed maximum price of US$60 per oil barrel should be introduced, so as to further reduce Russia’s energy market profit. 

Clearly, Russian gas was heavily sanctioned as well, even though the issue has been long debated in Europe due to the serious difficulties in limiting a resource widely imported by member states before the war (in 2021, Russian gas imports represented 40% of all gas used in the EU). The Council of the European Union reports that “the share of Russian gas started to decline rapidly and the market shares of other suppliers started to grow”. In November 2022, Russian gas constituted 12.9% of European imports, a number that has significantly reduced: not enough, however, according to those European leaders that are most “unfriendly” to Russia.

The European Union imposed other energy measures, including: an import ban on LGP, costing Russia around €1 billion per year; a ban on new EU investments in the Russian mining sector (except for certain raw materials); a ban on specific oil refining technology exportation, making it difficult and expensive to improve oil refineries in Russia; a partial ban on new EU investments in Russia’s energy sector.

New and old partners

The first and most obvious consequence of the European sanctions was the rearrangement of the energy market on both parts. If, on the one hand, EU member states attempted to find new business partners to replace energy imports from Russia, Moscow also had to find new markets to export energy sources, or rather, to redefine the role of some of the old markets. India, China and Turkey became main partners of Russia in the energy sector, as almost 70% of Russian oil exports shipped by sea are imported by these three countries. Above all, India experienced a major increment, going from a few thousand barrels a day in 2022 to almost 1.5 million barrels a day in 2023. Another important factor to consider is that, even though the trend in Europe is to cut down on Russian energy sources, there are still countries relying heavily on Moscow, such as Slovakia and Hungary.

Are the sanctions effective?

It is not simple to assess whether and how much the EU sanctions imposed on Russia have been effective, but some reports have already been published. According to the Centre for Research on Energy and Clean Air (CREA), an independent research organization focused on discovering tendencies, causes, health impacts and solutions to air pollution, the EU sanctions are costing Russia around €160 million a day. CREA noted that, even though Russia benefited from the rise in fossil fuel prices in 2022, the effect is coming to an end and “further cuts on Russia’s income will severely undermine the country’s opportunities of continuing the offensive”. Additionally, CREA evidenced that the EU measures could be much more efficient if the parameters were revisited (for instance, bringing the oil price cap closer to Russian oil production costs) and there are other options available for the European Union to consider, in order to increase the impact on Russia.

To conclude, although it is hard to have a clear picture of the situation, several elements seem to give reason to the European vision that pushed for quick, efficient sanctions, despite the expectations in Brussels being too high. Russia is suffering the consequences of EU sanctions, but not as much as was expected. Also, some of these consequences affect member states as well. First of all, countries not aligned with the Western Bloc are tightening their relations, thus weakening the opponents’ hegemonic position, now in decline. Moreover, these sanctions are affecting the European markets with consequences difficult to assess. For instance, according to a report published by the Bank of Italy in November 2023, oil market shocks have short-term effects, as opposed to gas market shocks, with consequences harder to measure and far more severe: apparently, we’ll deal with them for a very long time.

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