After multiple debates and rounds of negotiations, in early June 2022, the European Union adopted the sixth set of sanctions against Russia and is poised to phase out almost 90% of Russian oil imports into the bloc by the end of the year. After the vote, some EU leaders were already brainstorming about a seventh round of sanctions targeting Russian gas but others argue that the EU rushed into an oil embargo. We discussed the impact of the sixth sanctions package against Russia on the country’s economy and the EU with several international experts. Check their insights below.
Key Takeaways:
- This June, the EU member states reached an agreement on their sixth package of sanctions against Russia over its invasion of Ukraine, including a complete import ban on all Russian seaborne crude oil and petroleum products in six to eight months.
- According to the calculations of the European Commission, the sanctions will cut 92% of Russian oil trade into the bloc by the end of this year.
- Experts estimate that Russia is losing a large part of the US$285 million of daily oil revenues previously received from the EU.
- Sanctions will mean higher prices for oil products globally, that will literally increase the prices for all goods and services, adding pressure to growing inflation numbers.
Which is the impact of the sixth package of sanctions against Russia on the country’s economy and the EU?
“In addition to the potential strengthening of the OPEC-EU/EU Member States dialogue, the main impact of the recently voted ban on oil from the former partners is the acceleration of European policy trends regarding the Green Deal energy policy. This situation will oblige Russia to search for new clients to buy its oil. It is expected that the EU will speed up the integration process of its energy market. Efforts will likely accelerate during the coming months as it is the warmest part of the year and less oil-based consumption is expected before lower temperatures return. However, the union’s dependence on Russian oil is up to the point that a large part of the European energy supply to Ukraine is of Russian origin. The measures chiefly affect the unit price of oil-dependent products that equally has an impact on several value chains, ultimately raising the price of products in the consumers’ shopping basket. The population’s mood will eventually has a say on both sides”.
“Hit where it hurts most – this is what the sixth package of sanctions that the European Union imposed on Russia can be viewed as. Losing a large part of the US$285 million in daily oil revenues that Russia receives from the EU is bound to hurt. Whilst this latest blow is somewhat softened by high crude oil prices and increased oil sales to other markets, the latest sanctions will hurt the Russian economy and limit the resources Russia has available to finance its aggression in Ukraine. However, no war is won without casualties and, in this case, the sanctions will mean higher prices for oil products globally. Higher oil prices will not only result in paying more at the gas station but literally increase the prices of all goods and services that even in a limited way depend on gas. This price increase will add further pressure to the growing inflation numbers which in many cases bring into the picture hikes in interest rates, as already witnessed in the United States. Measures against the aggression need to be taken, however, the consequences will be witnessed on both sides – for the sanctioned as well as the sanctioner.”
“The recently adopted sixth package of sanctions against Russia has its flaws: it will be implemented by the end of the year, it includes exceptions (for Hungary, the Czech Republic, and Slovakia), etc. Russia could respond by slashing exports over the summer – something that due to low stocks and the scarcity of refining capacity in Western Europe could test the collective commitment of the member states to support Ukraine. Thoughts that Saudi Arabia could increase crude production if Russia curtails its output are not correct due to the current political problems in its relationship with the U.S. The aspect of inflation has not been thought through at all in getting the ‘sixth package’ decision. And there is a good reason for this: there are other more serious factors that have caused global inflation to be at a historically high level (e.g., the green politics agenda) so the effect of the war is secondary.”
See also: How do the sanctions imposed on Russia affect the global economy? | Experts’ Opinions
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