Financial TimesFinancial Times

An EU oil ban is a tightening noose on Russia’s economy

By The Editorial Board

03 May 2022 · 3 min read

In a few short weeks, assumptions have been dramatically overturned on how far Russia was prepared to go in its war against Ukraine — and how far western countries would go in response. The EU is edging towards a phased embargo on Russian oil exports, on top of similar US and UK moves. This is a momentous but risky move. The US has worried that moving too fast could drive up global oil prices; Germany has warned of the economic hit even while signalling it will back an embargo. Handled carefully, however, the costs can be contained. And the pain for Russia is ultimately far greater.

Though Russia’s gas exports often attract more attention, Moscow earns much more from selling oil and oil products — the biggest single source of economic rents to Vladimir Putin’s regime and war machine. Rystad Energy, a research group, estimates that higher prices mean the Kremlin is set to generate $180bn in oil tax revenues this year, despite traders refusing to take some Russian crude — equivalent to 60 per cent of Moscow’s 2022 federal budget.

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