Why oil is back above $120 per barrel
There are reasons, however, to be sceptical that the move will deprive Kremlin of much foreign currency. For a start, the embargo applies only to
, transported via tankers. That is the price of unity: excluding oil delivered by pipelines was necessary to find a compromise with Hungary, which is both more sympathetic to Russia than mostcountries and critically dependent on the Soviet-era Druzhba pipeline . Hungary imports about 65% of its crude from Russia.
Seaborne oil makes up a similar proportion of Europe’s imports from Russia. But the ban is likely to have a limited impact on the oil market. Many tankers are already subject to so-called self-sanctioning in parts of the West. Dockworkers have refused to unload ships carrying Russian cargoes and oil majors have been worried about the hit to their reputations from accepting shipments. Western financiers are stepping back from writing insurance contracts.
A big question is whether Russian seaborne crude, once placed under sanctions, will go unsold. So far Russia’s oil exports have increased even as the country has come under sanctions. According to analysts at JPMorgan Chase, a bank, Russiansince the invasion of Ukraine. Much of it has gone to India, which has not issued sanctions of its own.
Another question is whether Europe does eventually ban piped Russian oil, which is harder to redirect to other countries. Poland and Germany have said that they will cease imports via the Druzhba pipeline. Yet it is hard to imagine Hungary dropping its opposition to a wider ban. Viktor Orban, the country’s populist prime minister, has demonstrated his willingness to blockdecisions before.
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