Oil price to skyrocket, as EU bans Russia’s export

Russia has been banned from exporting about 90% of its oil to European countries, amid fresh sanctions by the European Union (EU) in its effort to stripe Vladimir Putin of its capital to finance the war against Ukraine, which began in February 2022.

Most of the affected Russian oil is delivered by sea, while those transported by pipelines are still untouched, due to Hungary’s 60% dependence on Moscow’s oil, and 85% of natural gas pumped from Putin’s country.

The pipeline was left untouched to enable EU get the backing of Hungary for the sanction against Russia, as the vote must be unanimous. According to EU’s Ursula Von der Leyen, on Monday, the restriction will take complete effect by year end.

Other sanctions against Russia include the agreement to disconnect Sberbank from SWIFT, which is a major financial transfer system for global market. Smaller banks in Russia had initially been pulled out of the system days after Russia invaded Ukraine.

Some assets freeze, travel ban, are included in the sanction list, as well as the prevention of three big Russian state-owned broadcast firms from transmitting into Europe.

Responding to the ban on oil exports into European market, Russia’s permanent representative to international organizations in Vienna, Mikhail Ulyanov, said the country will find new buyers for Russian oil.

“As she rightly said yesterday, Russia will find other importers.” Ulyanov stated on social media platform, Twitter.

Pending the period Russia finds new buyers, the ban, when taken into effect, will create excess Russian oil with limited destinations, and it could result into significant financial loss on the part of Moscow, forcing the country to sell the excess, if available, at a cheaper rate.

This might also force Russia to pump less oil, which will reduce global supply, thereby skyrocketing oil price, which has been at its highest levels, stretching to about $123.8 per barrel on Tuesday, after the oil embargo was announced by EU.

Meanwhile European countries have agreed to provide €9 billion to Ukraine, as a supportive measure. The funds, which was not termed as loans or grant, will be disbursed in tranche to support the country’s economy.