The European Union is preparing to impose its toughest sanctions yet on Russia, banning imports of its oil and prohibiting insurers from covering its crude cargoes, officials and diplomats say, as the West seeks to deprive Moscow of funds needed to fund the war in Ukraine and keep its economy running. The sanctions, which are scheduled to be finalized within the next few days, are worse than anticipated. The insurers' prohibition will apply to vessels transporting Russian oil wherever in the world. These sanctions may jeopardize Russia's ambitions to export oil to Asia. European corporations insure the majority of the world's oil commerce.
EU leaders said late Monday that they had reached an agreement in principle to restrict Russian crude and refined fuels arriving on ships, which account for at least two-thirds of Russia's imports. To persuade Hungary, fuel imported through the pipeline was exempted from the agreement. The prohibition will be implemented gradually over several months. By the end of the year, with Germany and Poland no longer importing oil through pipelines, the embargo would have covered 90 percent of past Russian oil shipments, according to EU officials.
The insurance ban, which is set to go into effect in six months to appease shipping nations such as Greece and Cyprus, is the worst of the two measures, merchants and shipowners believe. Few firms are ready to transport oil in tankers that are not insured. A similar restriction was imposed on Iranian oil shipments a decade ago as part of efforts to convince Tehran to compromise its nuclear program. The insurance ban, by making it harder for Russia to sell oil to Asia, makes it more likely that oil prices will stay high or go higher.
In recent months, Europe has switched away from Russian oil, reducing imports from Moscow and instead of buying petroleum from West Africa, the United States, and elsewhere. Germany, which receives Russian oil via the northern section of the Druzhba pipeline, reduced its purchases of Russian oil when the war began, lowering its dependency on Moscow to 12% from 35%. Replacing Russian diesel will be considerably more challenging for Europe. Analysts and dealers predict that the gasoline, which drives a larger percentage of Europe's vehicle fleet than in the United States, will likely come from the United States, the Middle East, and India. According to Ms. Sen, fuel will be in limited supply internationally this winter.