A European ban on Russian crude risks Moscow using the natural gas 'power tool' in its arsenal, Vortexa said
- The risk of Russia cutting off natural gas may mean
Europedoesn't ban Russian oil, Vortexa's chief economist said.
- Oil is a major source of money for Russia, while natural gas is its political weapon, said David Wech.
Europe is under pressure to ban imports of Russian
The European Union gets 30% of its crude oil from Russia. A ban would hurt, but it's not a matter of there being no alternatives, according to Vortexa's chief economist David Wech.
"I think the most important factor probably holding some European countries back from banning Russian crude imports is the concern that this will lead to a situation where also
Russia is a major producer of
"What is important to understand here as well is that Russia earns way more money with oil than with gas. So they will not hurt their oil income," Wech said. "They know that Europe is more dependent on gas, they know they have more power on that side."
"So the gas is the political power tool. The oil is the income tool," he said.
Since it invaded Ukraine, Russia has made over $66 billion from its energy imports. The EU has stumped up $46 billion to pay Moscow for fuel in that time, according to a report by the Centre for Research on Energy and Clean Air.
Western countries have hit Russia with intense sanctions following the war, but the EU has not yet banned Russian oil and gas. Less dependent nations, such as the United States and Britain, have stopped
Russia has put measures of its own in place, such as demanding payment for natural gas in rubles from "hostile countries". Gas generally continued to flow uninterrupted through the pipelines that service Europe, until this week, when Russia announced it had turned off the gas taps to Poland and Bulgaria. European natural gas prices are
The infrastructure alone - a network of overground pipelines that run for thousands of miles through numerous countries - means it's a lot easier for Russia to cut gas to Europe than oil.
"It's not so straightforward to have a say over where the oil is going. Russian companies want to export the oil, they don't care that much who is ultimately taking it," Wech said. "There is not this direct link like with the gas pipelines, where there is this one to one relationship, but Russia can decide to whom it (cuts) off the gas."
Europe can easily source oil from other countries, Wech said, although a ban would risk an escalation of war in Ukraine and a direct hit to consumers across the region that are already struggling with sky-high inflation, largely driven by surges in the price of oil and gas.
European natural gas prices surged as much as 180% in the immediate afthermath of the invastion. They've since retreated, but are still a full 300% higher than they were at this point last year.
One option is the United States, which, thanks to the boom in shale oil, is now the world's largest producer and its exports go all over the world, Wech said.
"The US will rank highly, that's natural, given its size, and its proximity and also the crude quality, but it's by far not the only option."
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