Will the EU ever ditch Russian energy?
As EU leaders meet to decide on a fifth package of sanctions against Moscow, member states are under intense pressure to ditch Russian fossil fuels once and for all.
Brussels is proposing a ban on coal exports but it has stopped short of a full embargo on Russian energy. Moscow is still receiving roughly $750m in gas revenues a day from the bloc. The continent’s continued purchasing of Russian energy is keeping the country’s economy afloat, and softening the blow of sanctions.
As Josep Borrell, the EU’s foreign policy chief, pointed out today, the EU has provided Ukraine with €1bn of military assistance since the start of the war – but this pales in comparison to the €35bn the bloc has spent on Russian energy over the same period.
To date, Charles Michel, head of the European Council, has been vague in his statements to the European Parliament about the longer-term strategy: “Measures on oil and even gas will also be needed sooner or later.”
The West has already hit Russia with severe financial, trade, and investment sanctions, and frozen much of its foreign-exchange reserves. Yet until now EU sanctions imposed on Russia have exempted sales of fossil fuels.
By comparison, the US has banned imports of all Russian energy – which are admittedly relatively small – and the UK has committed to ending all shipments of Russian coal and oil by the end of 2022.
Supported by these continuous inflows of European money, the rouble has bounced back. After plunging to 150 roubles to the dollar in early March, the currency is now trading at roughly 86 to the dollar – not far off pre-invasion level.
Half of Russia’s foreign assets are frozen, but as long as European countries are purchasing Moscow’s oil and gas, Russia still has enough hard currency to pay for its imports and it doesn’t have to dip into its frozen reserves.
The EU is acutely aware of the problem – but the speed and degree to which it will cut Russian energy is causing anguished debate between member states.
Last weekend, Lithuania became the first EU member to announce it had stopped importing “toxic Russian gas.” Other member states, like Germany and Italy, are reluctant to follow its lead.
Germany’s feet-dragging is understandable, when you consider that roughly half of its gas and coal imports, and about one third of its oil imports, originate from Russia, compared to 4% of the UK’s gas supply and 6% of UK oil imports.
Germany has said it will reduce Russian gas and oil imports week-by-week but insists that an immediate embargo would plunge the country into recession.
A blanket ban would certainly come at a considerable cost to the bloc. But as the barbarism of Putin’s offensive is uncovered, the moral cost of continuing to fund the Russian war machine might prove just too great.