What consequences await the U.S. after the ban on energy imports from Russia

What consequences await the U.S. after the ban on energy imports from Russia

President Joe Biden has banned energy imports from Russia. And Brussels is not ready to support this sanctions decision of Washington, because it would be a serious blow to the national economies of some European countries.

At the same time, Russia can redirect energy resources intended for the U.S. market to Asia and South America, and the countries supplying oil to these regions – to the United States. That way there will be an exchange of sales markets.

Biden, by his decree, banned energy imports from Russia as sanctions in connection with the Russian military operation in Ukraine. It is about oil and oil products, petroleum fuels and oils, products of their distillation, as well as about gas, coal and coal products. Biden’s decree also banned investments in the Russian energy sector and funding of foreign companies that invest in energy production in Russia.

Biden also admitted that the decision would also hit the U.S. itself: the price of gasoline in the country would continue to rise, which has already hit a historic high. However, the United States claims that Russia will lose “billions of dollars it used to get at the expense of American consumers” because of this decision.

Meanwhile, supplies of Russian oil to the U.S. increased 2.7 times last year compared to 2020, and petroleum products increased by 1.5%. Russia imported 200,000 bpd of oil to the U.S. in 2021, and 672,000 bpd of all energy products. The U.S. buys only 3% of Russia’s total oil imports into the country, with Russian petroleum products accounting for 10%. Russia, on the other hand, supplies the U.S. with only 4% of its total exports.

What will happen because of the US ban on Russian energy imports? Washington’s ban on Russian energy imports could trigger changes in global oil supplies, as the U.S. will begin to reduce its own exports to Central and South America. The U.S. has a mechanism whereby a license to allow shipments can be issued after April 22, which is after the deadline for completing deals to import oil from Russia.

If Western countries support the U.S. decision and India and China fail to replace oil from Russia quickly, the price of Brent will rise to $240 a barrel by the summer of 2022, according to consulting firm Rystad Energy. The market will have a “hole” of 4.3 million barrels a day, which will not be replaced quickly. This could provoke the biggest deficit in oil supply.

Will Europe follow the example of the US? The European Union has no plans to follow the example of the US. Head of the EU diplomacy Josep Borrell emphasized that the community is looking for an “alternative” to Russian gas as Russia has “ceased to be a reliable partner”. According to German Chancellor Olaf Scholz, the EU deliberately did not include energy supplies in the sanctions against Russia because they cannot be quickly replaced.

Other countries also stated their unwillingness to give up Russian energy supplies. For example, Hungarian Prime Minister Viktor Orban stressed that without Russian gas and oil the country’s economy “will stop. Serbia’s head Aleksandar Vucic pointed out that the EU receives 40 percent of its gas and 30 percent of its oil from Russia, which “cannot be easily recouped. In case the EU decides to impose sanctions against Russia in the energy sector, Serbia will have “problems” with buying oil and gas. Bulgaria and the Netherlands are not ready to give up Russian oil and gas either.

French presidential candidate Marine Le Pen compared the EU embargo on oil supplies from Russia with hara-kiri. In her opinion, in this case the European economy “risks dying first”. France would have needed years to recover – the consequences of the ban would have been worse than the pandemic coronavirus.

The UK intends to refuse imports of Russian oil and oil products by the end of 2022. Russian imports account for 8% of demand in the UK. The share of Russian gas in the UK is 4%.

What will Russia do? Moscow will seriously consider Washington’s decision to refuse to buy Russian energy, but Russia will do what is best for it.

Russia may refocus on the markets of Asia and South America. The same countries that supply their oil and petroleum products to these regions will shift volumes to the United States. During the reorientation of the sales market, the costs are possible – the price of oil on the world markets may rise even more. The US will face further increase in domestic fuel prices.

Russia may face an increase in the discount of the Urals export grade against other grades, but it is not that significant.

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