Russia is one of the main suppliers of coal, oil and gas in the world. It uses this fact to blackmail other countries that are imposing economic sanctions against it and its armed invasion of the territory of Ukraine. The sale of oil and gas allows Russians to get money to continue the war. The world is taking steps to limit this process: the fifth package of EU sanctions introduced an embargo on Russian coal, which came into effect in August 2022, Poland prematurely terminated the gas agreement with the Russian Federation, and at the beginning of March, the US banned the import of Russian oil and gas. However, how much do European and other countries depend on Russian resources, and is a complete embargo on them possible? Let’s try to figure it out.
In accordance with the International Energy Agency, Russia is one of the top three oil producers along with Saudi Arabia and the USA. As of 2021, oil and gas exports accounted for 45% of the country’s entire budget.
According to Forbes, as of 2021, the top 10 importers of oil and oil products, natural gas, and hard coal from Russia are the following countries: China, Netherlands, Germany, Italy, Turkey, Poland, South Korea, USA, Belarus, and France. EU countries have been and still remain the most dependent on Russian energy resources.Collectively, they consume three times more Russian energy than China, which is the largest buyer country; approximately 60% of Russian oil is delivered to the European Economic Region, while 20% goes to China.
In addition, Russia is the second largest producer of natural gas in the world.
Its biggest importers are Germany, Turkey, and Italy. For the European Union, Russian gas also plays an important role: in 2021, it accounted for 40% of the Union’s demand. The International Energy Agency notes that over the last decade, the dependence of the EU and Great Britain on Russian gas has increased significantly, from 25% of the total consumption in 2009 to 32% in 2021.
However, this was not always the case. The dependence of the EU on Russian gas appeared in the second half of the last century. Until about the 1970s, Europe supplied itself with gas from its own deposits, but over time the gas fields began to be exhausted, and the demand only increased. European countries began to conclude long-term contracts for cheap raw materials with the USSR, which had discovered new deposits in Siberia and had significant reserves of oil and gas. The trade relations of the Union with the Federal Republic of Germany were special: the latter manufactured pipes for gas pipelines and received gas in return.
Over the past half-century, Russia has done everything to increase the number of buyers of its resources and become a monopolist at least on the European market. It was all done to make natural resources their own weapons. The head of the European Commission, Ursula von der Leyen, in her speech in the European Parliament on 25 July 2022, noted that the Russian Federation is reducing supplies and called on the EU to prepare for the complete cessation of gas supplies from Russia.
What has changed since 24 February 2022
Unfortunately, it is quite difficult to overcome an addiction that has been formed for decades in a few months. As some countries are gradually refusing to buy Russian energy, Russia’s revenues from energy exports have been falling since March. However, they still remain high, according to the Finnish Centre for Energy and Clean Air Research. From 24 February to 3 June 2022, the Russian Federation received 93 billion euros from fossil fuel exports. The largest importers were China (12.6 billion euros), Germany (12.1 billion euros), Italy (7.8 billion euros), Netherlands (7.8 billion euros), Turkey (6.7 billion euros), Poland (4.4 billion euros), France (4.3 billion euros), and India (3.4 billion euros).
At the same time, some countries are making notable progress on the way to abandoning resources from the Russian Federation. For instance, Finland and Estonia managed to reduce energy imports from Russia by 50%. In June, for the first time in its history, the EU received more gas imported by sea from the USA than through pipelines from Russia. Back in April, Japan announced, that it was introducing a full embargo on Russian coal. The Czech Republic plans to completely abandon Russian energy carriers in the next five years. Vice Chancellor of Germany Robert Habeck declared that the country has the intention to become independent from Russian hard coal by the autumn of 2022 and from its oil by the end of the year. Great Britain is introducing an embargo in several stages: the ban on the import of Russian gold entered into force on 21 July, the embargo on coal on 10 August, but on oil only on 31 December.
Significant progress is being made by Lithuania, which in April 2022 gave up Russian gas, and in May gave up all energy carriers of the aggressor country. Lithuanians will partly produce electricity from their own resources and partly import it from other countries of the European Union. The country is supplied with gas by the USA, and it buys oil from Saudi Arabia.
Thanks to these steps, Russia has no direct levers of influence on Lithuania, except for threats. For example, in response to the ban on the transit of sanctioned goods through Lithuanian territory to Russia’s Kaliningrad region (an enclave surrounded on all sides by EU countries), Russia announced that it reserves the right to “take actions to protect its national interests”. What exactly these actions are and what it will mean for Lithuania, only Russians know.
At the beginning of summer, the European commission, along with the British government, planned to prohibit insurance for the tankers that transport oil from Russia. However, as of 9 August, Great Britain has not yet joined the restriction. As reported by Ukrainian Minister of Foreign Affairs Dmytro Kuleba, the majority of Russian fossil fuel is carried by European ships, namely owned by private Greek companies. Thus, the ban on tanker insurance in some cases will prevent Russian oil transmission. In addition, the USA plans to impose sanctions against Chinese companies that register or insure Russian tankers with oil or liquefied gas.
At the beginning of June, the EU introduced the sixth package of sanctions, which includes a ban on the import of Russian oil transported by sea. It affects Russian economics significantly right now, but global changes are yet to come — as countries used to have long-term contracts with Russia, it takes time to terminate them. The complete ban will come into effect 5 December 2022. Furthermore, there are some exceptions for certain countries. For instance, Bulgaria will continue to import crude oil and petroleum products by sea until 2024.
In order to prevent Russia’s use of exceptions to sanctions, the sixth package introduces the following restriction: the countries that continue to receive oil from the Russian Federation cannot resell it to third states. However, they are still able to sell petroleum products. For example, India supplies aviation fuel produced from Russian oil. As of the beginning of August, European countries have not abandoned it.
In the seventh sanctions package, Poland suggested a full embargo on energy carriers from the Russian Federation, but this proposal was not approved. European countries are still not united on this issue, because Europe is not a monolithic entity, and each of the countries depends differently on the resources of the aggressor state. Hungary completely refused to support the Russian oil ban, arguing that the state requires a guarantee of its own energy security. Overall, this position is profitable for the Hungarian government and especially for Hungarian Prime Minister Viktor Orban, who is known for his pro-Russian position. Moreover, this country has no outlet to the sea, thus the only opportunity to import oil is the Druzhba pipeline.
Druzhba pipeline
The world's longest pipeline for oil transportation from Russia to central and western Europe. It has two branches — the northern (Belarus, Poland, Germany) and the southern (Ukraine, Czech Republic, Hungary).In mid-June, the gas pipeline TurkStream had not been working for a week as allegedly it was in need of renovation. In mid-July, Nord Stream 1 supposedly was closed for repair. Also, in mid-June, Russia reduced the supply via this pipeline by 40%. Germany suspended all activities for the certification and launch of Nord Stream 2, so it is likely the project will never be brought to life.
Nord Stream
The pipeline from Russia to Germany. Its first branch was built in 2011, and the second one that goes through the economic zones and territorial waters of Denmark, Germany, Russia, Finland, and Sweden is still waiting for certification.
Unfortunately, the blackmail based on gas supply worked well on the German government: in June, it called on Canada to return the turbines that are necessary for service of the pipeline, in spite of its own sanctions. In a few weeks, those turbines got stuck in Germany, and, as of 10 August, they have not yet arrived in Russia, as it refuses to receive them. Those turbines are just the levers of pressure on Europe for Russia. As journalist Vitaly Portnikov noted, Putin expected that the system of bypassing gas pipelines will allow him not to care about the Ukrainian gas transit system during the war, as it will no longer be needed. That is why the Kremlin is trying to achieve the certification of Nord Stream 2, blackmailing Europe with a severe winter and lack of gas.
This is not the first time Russia has blackmailed Europe with gas — the Russian Federation has considerably reduced volumes of supply and begun to work only with long-term contracts since autumn 2021. As noted by the BBC, it caused a historical peak of prices on this resource in winter. Overall, the cost of Russian gas has increased by four times over the last year, and Putin blames Europe for that fact. The reason for the whole thing is the EU’s desire to gradually give up Russian resources and switch to the alternative sources of energy. Of course, this is not included in Russia’s plans.
Now Ukraine is in need of increasing restrictions against Russia and putting additional pressure on it. As of June 2022, Russia is paying 900 million dollars per day for military action, while it has received 800 million dollars for energy carriers from European countries daily since the beginning of the full-scale invasion. In order to stop the war and block access to Russia’s source of funding for warfare, the EU ought to introduce the complete embargo of Russian oil and gas.
A major change since the beginning of the full-scale invasion of Ukraine by Russia is world politicians’ perception of Russian energy carriers. If the transition to alternative energy sources has been gaining momentum for a long time, now it has accelerated even more. It is also beneficial for Ukraine.
For instance, the EU is able to use Ukrainian electricity and save the amount of gas needed for producing its own electricity (the Ukrainian energy system has been officially connected to the EU’s energy system since 16 March). According to rough estimates, the economy will account for 17% or 25.5 billion m³ of gas. This is equal to the amount Austria consumes over three years.
The world and the EU in particular should understand that the addiction to fossil fuel is a problem that has ecological, political, and economic consequences, especially if a gas station country with a dictatorial regime is the monopolist on the market. As an aggressor state, Russia is trying to keep control over the whole world in its hands, independently creating food, energy, and migration crises and increasing the dependence of other countries on its resources. In addition, the environmental situation is getting worse, as the states are looking for other sources of oil, gas, and hard coal production instead of expediting the transition to alternative energy sources.
Finally, the European Union and other countries need to introduce a complete Russian oil and gas embargo, prohibit the insurance of its ships, close the pipelines, give up purchasing Russian aviation petroleum, impose sanctions on the oil traders engaged in Russian oil supply, and restrict the opportunity to pay for Russian resources, in order to end the war as soon as possible and provide their own energy resources independence. Not only Russian tanks at the border terrify independent states. Anything that was discounted by Russia yesterday will become its weapon today.
