Russia's invasion of Ukraine has resulted in a barrage of sanctions from the international community. Sanctions are not limited to the Russian economy but include energy, military, and sporting events as well. The US and the UK imposed sanctions on the Russian Central Bank and removed access to the SWIFT payment system for select Russian banks. The EU has closed its airspace to Russian flights, banned Russian broadcasters, and placed travel restrictions on Russian oligarchs. FIFA and UEFA barred Russia from international competitions, including the World Cup.
Western Countries Avoiding Crude Oil Sanctions
The sanctions do not include Russian crude oil. Many countries are avoiding a ban on Russian crude oil as they are highly dependent on Russia. Only Canada announced a ban on crude oil imports from Russia since it is not heavily dependent on Russia for its energy requirements.
Russia's economy is mostly dependent on crude oil exports. The embargo on Russian crude oil will hamper the Russian economy, but other countries dependent on Russia will also suffer from the ban. According to the US Energy Information Administration, in 2021, the US imported 245.2 million barrels of crude oil from Russia, accounting for 7.9% of total imports. According to Eurostat, in 2021, crude oil accounted for 73% of the EU imports of energy products, with Russia being the largest supplier. The EU imported 25.7% of crude oil imports from Russia and 24.7% in the first semester of 2021.
Oil Prices are Triggered
The uncertain situation due to the Russia-Ukraine conflict has disrupted the oil supply, with the price of one barrel of crude oil reaching a seven-year high at $105.79 on March 1, 2022. Crude prices will remain high if additional sanctions are imposed on Russia. The demand for crude oil is also disrupted due to the ban on several banks, hindering payments.
On March 1, 2022, the International Energy Agency (IEA) held an extraordinary ministerial meeting amid soaring prices of oil due to severe supply concerns. At the meeting, the international body agreed to an initial release of 60 million barrels of oil from its emergency reserves to aid the import-dependent countries. For context, the IEA members have 1.5 billion oil barrels of reserves for emergency use. The US and its allies (European countries, Saudi Arabia, and the UAE) are also contemplating releasing oil reserves of around 8 million tonnes in a coordinated manner to maintain the supply of crude oil and keep the crude oil price below $100 per barrel. European countries are working on reducing the dependency on Russia for their energy requirements. These countries increased the imports of liquefied natural gas (LNG) from the US and Qatar. However, countries that are dependent on Russian energy resources need to improve the LNG terminals' capacity for efficient supply to reduce the impact of sanctions on Russia.
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