EU plans to ban Russian oil by the end of the year due to Ukraine invasion

The European Union plans to ban Russian crude oil over the next six months and refined fuels by the end of the year as part of a sixth round of sanctions to increase pressure on Russian President Vladimir Putin over his invasion of Ukraine.

“This will be a complete import ban on all Russian oil, seaborne and pipeline, crude and refined,” European Commission President Ursula von der Leyen said in remarks to the European Parliament. “We will make sure that we phase out Russian oil in an orderly fashion, in a way that allows us and our partners to secure alternative supply routes and minimizes the impact on global markets.”

The EU is also proposing to cut off Sberbank and other lenders from the SWIFT international payment system, von der Leyen said.

The EU’s 27 member states are set to meet later on Wednesday to discuss the proposal.

The move dramatically increases the stakes with Moscow as the EU, the single largest consumer of crude and fuel from Russia, seeks to pressure Putin. In 2019, almost two-thirds of the bloc’s crude oil imports came from Russia.

The proposals include banning all services linked to transportation of Russian oil, including financing, brokering, technical assistance and financing assistance, officials said. The restrictions would also include insurance, two of the people said. The measures would follow the same timeline as the ban on Russian oil.

In a bid to convince reluctant countries not to veto the proposal, Brussels has proposed a longer period to implement the embargo for Hungary and Slovakia, an EU source told Reuters, declining to be named because of the sensitivity of the matter.

Von der Leyen also proposed banning three big Russian state-owned broadcasters from EU airwaves, and sanctions against high-ranking military officers and other individuals who committed alleged war crimes in Bucha and who are carrying out “the siege of Mariupol.” The EU already banned RT and Sputnik in March. RT has fought the ban in EU courts.

The package would also include banning the services of “accountants, consultants and spin doctors from Europe” to Russian companies, von der Leyen said.

The oil move is a tough one for Europe, which is also facing potential cut-offs of Russian gas over the Kremlin’s demand to be paid in rubles.

“The EU gradual embargo on Russian oil is a risky bet, as in the short term it might leave Russian revenues high while implying negative consequences for the EU and global economy in terms of higher prices — not to talk about retaliation risks on natural gas supplies,” said Simone Tagliapietra, a research fellow at the Bruegel think tank.

Diesel will be a particular pinch point. Diesel supplies were constrained before the war even began. Now, a record-shattering premium to crude oil and extremely bullish forward curves point to a market that is screaming for fuel. At the center of the global crisis is Europe, a region heavily reliant on imports from all over the world — but most notably, from Russia.

More than 40% of the EU’s imports of diesel-type fuel came from Russia in 2020, according to Eurostat data compiled by Bloomberg. Historically, the U.K. is also a major buyer of Russian product, though it has already said it will phase out supply from the country.