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Ukraine war

U.S. leads Western ban on Russian oil

Lower imports put America in better spot to absorb impact than European partners

An oil treatment plant in Russia's Irkutsk region. Around 3% of U.S. crude imports came from Russia last year, compared with 30% for the European Union.   © Reuters

WASHINGTON/LONDON -- U.S. President Joe Biden's move Tuesday to ban imports of Russian oil targets a crucial source of foreign currency for Moscow, but whether European countries that depend more on Russian energy can follow suit remains unclear.

Western sanctions over Moscow's invasion of Ukraine previously avoided targeting the sector to prevent exacerbating the recent surge in fuel prices. This is a particular concern for Biden as he grapples with inflation, already at its highest level in four decades.

But as the conflict escalated, with reports of indiscriminate Russian attacks hitting infrastructure and residential areas, the White House faced mounting pressure including from lawmakers to take further action.

"The United States is targeting the main artery of Russia's economy," Biden said in a speech announcing the measure. The ban covers liquefied natural gas and coal along with oil, as well as American investment in or financing of Russian energy producers. A 45-day grace period will be provided for existing contracts.

West Texas Intermediate futures increased to over $129 a barrel at one point Tuesday before falling to around $124 in the afternoon. Brent crude rose as high as $133 a barrel.

Washington was able to take this step largely because Russia accounts for such a small share of American energy needs. The U.S. sourced only about 7% of its imports of crude oil and petroleum products from Russia last year, with the percentage falling below 5% in December alone, data from the Energy Information Administration shows. Meanwhile, nearly 30% of European Union oil imports come from Russia.

By the same token, the U.S. is a minor customer for Moscow, accounting for just 2.3% of the oil Russia exported in 2020, while about half went to European buyers, according to Japan Oil, Gas and Metals National Corp.

Biden acknowledged this discrepancy. "We're moving forward on this ban, understanding that many of our European allies and partners may not be in a position to join us," he said.

The U.K., which is less reliant on Russian crude than much of the rest of Europe, said Tuesday it will phase out imports of oil and oil products from the country by the end of this year. Russia supplies 8% of the country's overall oil demand, according to the British government. Shortly after the invasion, Prime Minister Boris Johnson had called for "ending Europe's collective dependence on Russian oil and gas that has served to empower [Russian President Vladimir] Putin for too long."

Germany is expected to move more gradually, as Chancellor Olaf Scholz said Monday that energy imports from Russia are still necessary.

"Europe has deliberately exempted energy supplies from Russia from sanctions," he said in a statement. "Supplying Europe with energy for heat generation, mobility, electricity supply and industry cannot be secured in any other way at the moment. It is, therefore, of essential importance for the provision of public services and the daily lives of our citizens."

Biden said Tuesday that the U.S. is "working closely with Europe and our partners to develop a long-term strategy to reduce their dependence on Russian energy as well."

The Biden administration aims to bring in oil from other countries to mitigate the sharp rise in petroleum prices. Senior officials traveled to Venezuela on Saturday to discuss restarting crude imports. In 2019, the U.S. under President Donald Trump imposed sanctions limiting petroleum exports from the South American nation.

Elsewhere, the Biden administration looks to ask Saudi Arabia to boost oil output, according to a report from Axios, despite soured relations between the two sides.

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