Wednesday March 9, 2022

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Wednesday March 9, 2022

U.S. and U.K. ban Russian oil imports in huge escalation of sanctions

President Joe Biden said the U.S. will ban imports of Russian fossil fuels including oil, a major escalation of Western efforts to hobble Russia’s economy that will further strain global crude markets.

“The United States is targeting the main artery of Russia’s economy,” Biden said Tuesday in Washington. “We will not be part of subsidizing Putin’s war.”

The U.S. move will be matched in part by the U.K., which announced a ban on Russian oil imports on Tuesday, though it will continue to allow natural gas and coal from the country. Other European nations that rely more heavily on Russian fuels will not participate.

Russian oil made up about 3 per cent of all the crude shipments that arrived in the U.S. last year. When other petroleum products are included, such as unfinished fuel oil that can be used to produce gasoline and diesel, Russia accounted for about 8 per cent of 2021 oil imports, though those shipments have also trended lower in recent months.

The scope of Biden’s action was not immediately clear, including exceptions and the impact on shipments already in transit. He also banned U.S. investment in Russia’s energy sector, according to an executive order Tuesday that authorized the Treasury and State departments to implement and enforce the prohibitions.

Biden’s move is a significant step in his sanctions campaign against Russia after its invasion of Ukraine. While so-called self-sanctioning by the oil industry has limited some purchases of Russian barrels, an outright U.S. ban would further weigh on the market and increase volatility.

Europe, by comparison, imports about 4 million barrels per day of Russian crude and refined products, according to Eurostat data. Russia was the source of 27 per cent of Europe’s crude oil imports in 2019, according to the European Commission.

Canada’s government announced last month that it intended to ban all crude oil imports from Russia, but the move was largely symbolic. The country hasn’t imported any since 2019.

After Bloomberg News reported Tuesday that the U.S. oil ban was imminent, the U.S. oil benchmark extended gains, rising 7.5 per cent to $128.38 at 10:45 a.m. in New York. The prospect of an oil import ban is helping drive crude to its highest levels since 2008.

In moving first on Tuesday, Biden can claim symbolic credit for the measure. But he also could end up shouldering blame for soaring fuel prices that will likely follow.

“Russia’s aggression is costing us all,” Biden said, warning against price-gouging by companies in the gasoline supply chain. He said that his policies aren’t hampering U.S. oil drillers from increasing production, and that the companies are instead choosing not to use leases on federal land they already hold.

In a sign that the U.S. is trying to round up other sources of energy, two senior U.S. officials met over the weekend with members of Venezuelan President Nicolas Maduro’s government in Caracas to discuss global oil supplies and the country’s ties to Russia, according to people familiar with the matter. The Biden administration is weighing a temporary waiver of sanctions against the country’s oil industry to allow it to increase production and sell more on the international market, two of the people said. (Financial Post)