The West moved swiftly to hit Russia’s economy following its invasion of Ukraine.
The most decisive action was to slap sanctions on the country’s central bank, preventing Moscow from getting its hands on a substantial chunk of the $643bn in reserves it has accumulated over the last decade.
The United States and United Kingdom followed this days later with plans to ban Russian oil – the US also looking to outlaw gas imports.
Ukraine war live updates: Bodies laid out on pavement as Kyiv shopping centre hit
Image: Brent costs have been climbing steadily again since the end of last weekBut with Russian crude still being bought by other countries, most notably India, it is clear more needs to be done to cut off financing to Vladimir Putin’s war effort.
AdvertisementProbably the biggest lever the West has yet to pull would be an EU embargo on Russian hydrocarbons in line with the ones imposed by the US and UK. Such a move would undoubtedly be a hammer blow for Russia.
That, though, is easier said than done. Russia supplies the EU with 40% of its gas and 30% of its oil.
More from BusinessThe EU announced, at the time of the US and UK action, plans to cut Russian gas imports by two-thirds within a year with a longer term goal of ending Russian energy imports – which currently hand Moscow €800m every day – by 2030.
But cutting itself off completely in one fell swoop would be extremely costly.
Image: Sky News GFX 8/3/22This is something the Russians themselves have gleefully pointed out. Alexander Novak, Russia’s deputy prime minister, confidently predicted earlier this month that the price of oil could hit $300 a barrel were the EU to join an embargo of his country’s energy exports.
He added: “A rejection of Russian oil would lead to catastrophic consequences for the global market.”
Yet such a ban is now openly being discussed again. EU ministers are expected to discuss the move this week, with Poland and the Baltic nations – particularly Lithuania – most keen to go ahead with a ban.
Image: Crude oil from Russia arrives at the PCK crude oil refinery in Schwedt, Germany. Pic: APFrance, which currently holds the EU presidency, is also said to be more open to the idea of a ban.
A spokesman for the French presidency said on Sunday: “These sanctions are intended to force President Putin to make a new calculation.
“Among our partners and among the countries that trade with Russia, there are some that are more sensitive to the oil and gas issue. However, the president [Emmanuel Macon] has said there is no taboo.”
Image: Global oil production chartThat was a reference to countries like Germany, the EU’s biggest buyer of Russian crude oil, Italy and Austria.
Germany argues it has already done as much as it can to wean itself off Russian energy without seriously hurting its economy.
This includes halting the opening of the controversial new Nord Stream 2 pipeline and indicating that it may overturn a decision by the previous chancellor, Angela’s Merkel, to phase out nuclear power by the end of 2022.
Image: Workers are seen at the construction site of the Nord Stream 2 gas pipeline, near Kingisepp, RussiaBut Germany dare not cut itself from Russia immediately because its economy, with its comparatively high proportion of heavy industry, is more energy-intensive than most other EU countries.
The Association of German Chambers of Industry and Commerce has suggested that, to compensate for a complete loss of Russian gas, Germany would require deliveries from every liquefied natural gas (LNG) tanker in the world in the absence of any other alternatives.
There are signs, though, that Germany, which receives more than half its natural gas from Russia, is moving more rapidly towards cutting off Russian supplies.
Robert Habeck, the German finance minister, said on Sunday that he had secured a long term partnership with Qatar to buy LNG.
Following a meeting in Doha with Sheikh Tamim bin Hamad al-Thani, the Qatari Emir, Mr Habeck said the island state had offered Germany more gas than he had expected.
He added: “Although we might still need Russian gas this year, in the future it won’t be so anymore. And this is only the start.”
Germany’s problem – which, by extension, is a problem for the West as it seeks to tackle Mr Putin’s thuggery – is that it has made itself so heavily dependent on Russia to the exclusion of other supplies.
It has not bought LNG from Qatar since at least 2009. Because it has preferred to buy its gas from Russia, via pipelines, it has also underinvested in terminals that would be able to receive liquefied natural gas imports.
By contrast other major energy importers in the EU, such as Italy and Belgium, have been buying heavily from Qatar for a number of years.
The danger is that, if it moves aggressively to buy more LNG, Germany is in competition with other big LNG importers, most notably Japan and South Korea, but also potentially the UK.
So some sort of co-ordination from the West is going to be essential – not to mention guarantees from the world’s big LNG exporters, such as the US, Qatar and Australia, that they can keep the gas coming.
This also presents, in the year that it is due to host football’s World Cup, a huge opportunity for Qatar to earn goodwill from the West. By contrast, both Saudi Arabia and the United Arab Emirates – both, like Russia, members of the OPEC+ group – have been seen as playing a more cautious game, despite having spare capacity to pump more crude that could help make up for a Russian shortfall. Qatar left OPEC at the end of 2018 after nearly 60 years of membership.
3:27 PM says he spoke with the Saudi Crown Prince about human rights, oil prices and the damaging economic consequences of inflation.It is another example of the way the geopolitical kaleidoscope is being shaken up as a result of Mr Putin’s war.
Pressure on Germany to take the ultimate step is also coming from other, sometimes surprising, sources.
Bulgaria, a far poorer country, is almost entirely dependent on Russia for its gas and yet it committed on Monday not to seek a new contract with Gazprom, Russia’s state-controlled gas supplier, when the current one expires in the middle of this year.
Ultimately, if Ukrainian civilian casualties continue to mount and the humanitarian crisis worsens, the moral case for an EU ban on Russian oil and gas will become overwhelming – regardless of what hold-outs such as Germany and Austria may say.