The United States and Great Britain banned oil purchases from Russia. This will reduce the country’s annual budget by $5.1 billion. The Polish Economic Institute estimates that cutting Russian gas supplies by two-thirds annually, which was announced on the same day by the European Commission, would cost Russia an additional $2.4 billion.
This means that the total restrictions on purchases of raw materials from Russia caused by the invasion of Ukraine may be associated with a loss of $7.5 billion annually. As PIE points out, it equates to about 5 percent. The value of all exports of this raw material from Russia.
– This is the first measure of this scale targeting the sensitive sector of the country that invaded Ukraine. Another step with much greater impact should be a ban on oil imports from Russia into the European Union, which is being pursued, among other things, through Polish diplomacy. This measure will reduce the budget of the Russian Federation by about 51 billion US dollars. This money has been, now and in recent years, one of the main sources of financing for the country’s military expansion. As the analyzes of PIE experts show, with skillful diversification of oil supply sources, the European Union will be able to completely exclude oil supplies from Russia – says Piotr Arak, director of the Polish Economic Institute.
Russian oil accounts for only 9 percent. This raw material imports into Great Britain and is a tiny part of Britain’s energy mix. However, this move will deprive the Russian Federation of about 1.4 billion dollars in revenue annually. The value of Russian oil exports to the USA in 2021 amounted to 3.7 billion US dollars.
The impact of the US embargo on Russia’s revenue will be about 14 times less than it would have been in the case of a possible EU embargo on oil alone. Despite the relatively small impact on the US and Russian economies, we expect the ban announced by President Biden to increase raw material prices in global markets. – Comments by Maciej Miniszewski, Analyst for the Climate and Energy Team at the Polish Economic Institute.
The European Union intends to abandon imports of Russian gas
On March 8, the European Commission outlined a plan to make Europe independent of Russian fossil fuels. It is based on two pillars: (1) diversification of gas supplies, thanks to increased import of LNG and bio-methane as well as import and production of hydrogen, and (2) reduction of fossil fuel use in the economy thanks to increased energy efficiency or share of RES. Gas imports from Russia will be reduced by 2/3 this year. In addition, in April, the European Commission will present a legislative proposal according to which, by October 1 of each year, underground gas storage facilities across the European Union will be at least 90 percent full.
– The changes are distributed over time, because the economy of the European Union is partly dependent on Russian raw materials. About 40 percent of them come from Russia. Imported gas 25%. Crude oil and 45 percent. coal. The revenue of the Russian Federation from the sale of oil and gas to the European Union is about 20 percent. budget, and therefore a possible embargo will have a severe impact on the Russian economy. However, this requires building alternative sources of raw material supply. The plan currently being presented by the European Commission could reduce the revenue of the Russian Federation by about $2.4 billion – summarizes Magdalena Mag, head of the climate and energy team at the Polish Economic Institute.
