UK to ban Russian oil imports by end of year

In synchronised announcements, western nations announce plans to cut back on Russian energy

Andrew Woodcock,Anna Isaac
Tuesday 08 March 2022 20:34
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Ukrainian President Zelensky to address UK MPs about Russian invasion

Western nations today tightened the economic sanctions on Vladimir Putin’s Russia, with measures to ban or dramatically cut back the energy exports on which it relies for much of its income.

In a set of co-ordinated announcements, US president Joe Biden signed off a ban on oil, gas and coal imports from Russia, Boris Johnson declared a UK oil boycott to be complete by the end of 2022 and the EU vowed to reduce demand for Russian gas by two-thirds this year.

It came as Ukraine’s cities, including capital Kyiv, continued to be subjected to bombardment by Russian forces on the 13th day of the unprovoked invasion. Efforts to evacuate civilians through humanitarian corridors were hampered by shelling from the invading troops.

Numbers of refugees fleeing the country passed the 2 million mark, according to official counts. And the humanitarian situation in the country’s besieged cities grew worse, including in the port of Mariupol, where bodies lay uncollected in the streets.

The EU is far more dependent on Russian energy sources than either the UK or US, and Germany’s foreign minister Annalena Baerbock warned the country would be thrown into chaos by an immediate ban.

But EU leaders will meet in Versailles on Thursday to thrash out a plan to phase out dependency on Russian gas, oil and coal imports “well before 2030”.

Meanwhile, fast food chain McDonalds bowed to pressure and announced it will shut its 850 outlets in Russia.

The international action came a day after Ukrainian president Volodymyr Zelensky appealed for an energy boycott, comparing the purchase of Russian oil and gas during Putin’s murderous assault on his country to “giving money to a terrorist”.

Russian deputy prime minister Alexander Novak warned boycotts would have a “catastrophic” impact on the world economy, driving prices up beyond $300 (£229) a barrel from their current historic highs around $125 (£95).

Analysts warned of a significant impact on western societies, with the chief UK economist at Pantheon Macroeconomics, Samuel Tombs, telling The Independent petrol prices at the pump could soar by 50 per cent in April, driving consumer inflation up to 8.7 per cent.

Even though the US imports relatively little Russian fuel – 245 million barrels of crude oil and petroleum products in 2021 – Mr Biden acknowledged that the boycott would force up costs for American drivers in what he termed “Putin’s price hike”.

“We will not be part of subsidizing Putin’s war,” Biden declared, while warning: “Defending freedom is going to cost.”

The average price of a gallon of gasoline in the States already stands at a record $4.17, up 55 cents over the last week alone.

Mr Johnson said the use of Russian oil products would be phased out gradually to give markets time to adjust – particularly the diesel sector, which is 18 per cent reliant on the country for supplies.

The prime minister said the move would be “another economic blow” to the Putin regime, and said he was “confident” that the gradual introduction of the ban would ensure consumers are protected.

Overall, the UK takes 8 per cent of its oil from Russia, along with 4 per cent of its liquified natural gas, which is not affected by the ban.

This contrasts with the EU, which depends on Russia for 40 per cent of its gas and around a quarter of its oil.

Germany is particularly reliant on Moscow, after Angela Merkel’s decision to close all its nuclear power plants in the wake of the Fukushima disaster, and its chancellor Olaf Scholz has rejected calls for an all-out ban on Russian energy.

Robert Habeck, the economy minister, said: “We have to admit it, that we have manoeuvred ourselves into an ever-greater dependency on fossil energy imports from Russia in the last 20 years. All the German government’s – the country’s – efforts are going toward reducing this dependency as quickly as possible.”

This infographic by Statista shows the countries which import the most Russian oil

European Commission president Ursula von der Leyen said it was vital for the 27-nation bloc to wean itself off Russian energy, warning: “We simply cannot rely on a supplier who explicitly threatens us.”

Soaring energy prices during the Ukraine crisis have helped Putin fund his invasion, at a time when global sanctions are hitting many other parts of Russia’s economy.

According to the think tank Bruegel, the value of Russian natural gas exports to the EU has soared to around £410m a day, up from £165m in February.

But the UK government said oil exports were being “ostracised” by the market, with nearly 70 per cent struggling to find a buyer, in part because of fears over whether sanctions will be an obstacle to delivery.

Oil exports, also worth hundreds of millions a day, have been hit because shippers are wary of tankers being sanctioned before they complete their voyage to Europe, with Urals crude trading at a discount.

The Confederation of British Industry’s (CBI) decarbonisation director Tom Thackray said the UK business community backed the sanctions in response to Russian aggression.

But he added: “While the UK has a mix of energy supply outside of Russia, the government needs to continue to work with affected industries to ensure alternative fuel sources are scaled up to meet the demands across our economy.”

And the Trades Union Congress’ (TUC) general secretary Frances O’Grady called for a windfall tax on energy companies to ease the impact on household bills and energy-intensive industries.

“No-one wants to see UK energy imports paying for Putin’s illegal war against Ukraine,” she said. “But working people will need government to support them over the coming months.”

Mr Johnson is due to release an energy supply strategy in the coming days, which will step up extraction of gas and oil from the North Sea as well as spelling out how the UK can replace Russian sources with alternative suppliers, as well as nuclear and renewables.

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