How will the US embargo on Russian crude oil affect Moscow and the West?

 How will the US embargo on Russian crude oil affect Moscow and the West?

In the context of Moscow's escalation of hostilities in Ukraine, President Joe Biden on March 8 announced a ban on imports of Russian crude oil. Critics of Moscow in Washington say sanctions on energy exports are the best way – or perhaps the only way – to force Russia to withdraw.

Here's a closer look at the latest US ban on the Russian economy:

Will Russia be hurt?

According to ABC News, the impact of the US crude oil embargo on Russia is likely to be small. The United States imports only a small fraction of Russian crude oil and does not buy Russian natural gas.

Last year, about 8% of US imports of oil and petroleum products came from Russia. Total imports are equivalent to 245 million barrels, or about 672,000 barrels of oil and petroleum products per day. Recently, the import volume has also decreased rapidly because buyers are afraid of the possibility of sanctions.

Given the modest amount of American oil it imports from Russia, Moscow is able to sell this product to another country, perhaps China or India. However, Russia may have to reduce prices significantly.

Advisor to the President of Ukraine: The West buys crude oil to pump money for Russia's war machine

Claudio Galimberti, analyst at Rystad Energy, predicts that if Russia is excluded from the global energy market, countries such as Iran and Venezuela could be "welcome back". Additional supplies from these countries could help stabilize prices.

White House Press Secretary Jen Psaki said a team of officials from the Biden administration were in Venezuela last weekend to discuss energy and other issues.

"By easing some of the demand, the US is driving down Russian oil prices and reducing Moscow's revenue," said Kevin Book, director at Clearview Energy Partners.

"In theory, this reduces Russia's revenue per barrel of oil sold, though perhaps not by much. The most important question is whether European countries will put more pressure on Russia."

How will oil prices react?

Information about the possibility of the US embargo on Russian crude oil products pushed prices up. Last month, oil traded at around $90 per barrel. Currently, the price spiked to nearly 130 USD/barrel in the context of buyers shunning Russian crude oil. Refiners fear they will be stuck with oil they cannot resell if sanctions are imposed.

On March 8, Shell announced that it would stop buying crude oil and gas from Russia, and close gas stations, aviation fuel and other operations in the country. A few days ago, the American energy giant was harshly criticized by the Minister of Foreign Affairs of Ukraine for continuing to buy Russian oil.

Energy analysts warn prices could go as high as $160 or even $200 a barrel if buyers continue to shy away from Russian crude. This trend could push gasoline prices in the US above $5 a gallon, a scenario Mr. Biden and many politicians want to avoid.

Did the US reduce its purchase of Russian oil before?

The US oil industry claims to have the same goal as the Biden administration and the US Congress, which is to reduce dependence on foreign energy sources. Even without sanctions, some US refineries have cut contracts with Russian companies. Imports of crude oil and products from Russia have decreased in recent years.

Preliminary data from the US Department of Energy shows that crude oil imports from Russia fell to zero in the last week of February.

Will Europe follow the US?

The US embargo will be most effective with the help of European allies. So far, however, only Britain has announced that it will end Russian oil imports by the end of the year.

On March 7, Prime Minister Olaf Scholz made it clear that Germany, Russia's largest energy customer in Europe, has no intention of joining any ban. On March 8, Robert Habeck, German Economy Minister, also defended Europe's decision so far to exempt Russia from energy sanctions.

Banning Russian oil and gas would be a painful decision for Europe. About 40% of Europe's natural gas for heating, electricity and industry comes from Russia. About 25% of Europe's crude oil also relies on this country. European officials are looking for ways to reduce dependence, but this will take time.

"The sanctions were deliberately chosen to have a severe impact on the Russian economy and the Putin regime," Habeck said. "But at the same time, they are also weighed so that our economy and our country have a embargo can be maintained in the long term. Careless action can produce the opposite result."

Elsewhere, Russian Deputy Prime Minister Alexander Novak threatened that Moscow "has the right" to stop sending natural gas to Europe via the Nord Stream 1 pipeline in retaliation to Germany for suspending the approval of the Nord Stream 2 project.