The U.S. and the U.K. will impose a ban on imports of Russian energy on Tuesday without the participation of European allies, according to people familiar with the matter.
The U.S. ban will include Russian oil, liquefied natural gas and coal, according to two people, who spoke on condition of anonymity. The decision was made in consultation with European allies, who rely more heavily than the U.S. on Russian energy, another person said.
The U.K. move will be done in concert with the U.S. and the ban will be phased in over the coming months, according to the person, who requested anonymity speaking about policy that hasn’t yet been announced. The ban won’t apply to Russian gas, the person said.
The White House announced Tuesday that President Joe Biden “will announce actions to continue to hold Russia accountable for its unprovoked and unjustified war on Ukraine,” though didn’t specify the measures. He’s due to speak at 10:45 a.m. in Washington.
The people spoke on condition of anonymity ahead of the announcement owing to its sensitivity. Spokespeople for the White House National Security Council declined to immediately comment.
Crude oil futures extended gains on the news, rising 4% to $124.21 at 8:19 a.m. in New York. The prospect of an oil import ban is helping drive crude to its highest levels since 2008.
The accelerated move comes as Congress had been getting ready to take action this week ahead of the White House. That put pressure on the Biden administration to move more quickly.
Russia’s gas and oil had so far been mostly spared from sanctions introduced by the U.S. and European countries, due to concern over the economic impact, particularly on Europe, which has greater dependence on Russian oil and, in particular, natural gas. 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.
Russian oil made up about 3% of all the crude shipments that arrived in the U.S. last year, U.S. Energy Information Administration data show. Overall, imports of Russian oil and petroleum products represented about 8% of the U.S. total. U.S. imports of Russian crude in 2022 have dropped to the slowest annual pace since 2017, according to the intelligence firm Kpler.
While so-called self sanctioning has limited some purchases of Russian barrels, an outright ban from the U.S. would further tighten the market and increase volatility, sending prices surging even higher.
Still, the U.S. is a relatively smaller buyer than Europe and the bigger risk to prices rallying lies in coordinated action between U.S. and Europe. For now, much of the impact of a U.S. ban was priced in by the market over the weekend and into Monday’s trading, sending the global benchmark to nearly $140 a barrel. Traders are saying the question now is about how long the ban lasts and whether oil from Iran and Venezuela could help fill the gap.
Administration officials in private discussions have said they should stress efforts to speed the transition to renewables and to expand domestic energy production, according to two people familiar with the conversations. But the White House isn’t planning any fresh initiatives.
Administration officials have been discussing with the U.S. oil and gas industry how a ban could affect American consumers and global energy supplies, as lawmakers in both parties in Washington race to advance bills barring Russian oil imports to punish the Kremlin for its invasion of Ukraine.
Congressional leaders were already moving to force the administration’s hands on the issue. Legislation to ban Russian crude imports gained traction rapidly among both Republicans and Democrats on Capitol Hill, with congressional staff honing text over the weekend and preparing for a House floor vote as soon as Wednesday.
House Speaker Nancy Pelosi told fellow Democrats at a caucus meeting Tuesday that the House would still move ahead with its own Russian oil ban legislation, according to a person familiar with her remarks. Key lawmakers Monday agreed to legislation imposing the oil ban and revoking favored-nation trading status for Russia and Belarus, a move that would pave the way for increased tariffs on the two nations.
Pressure on lawmakers to act increased after President Volodymyr Zelenskiy asked lawmakers to ban the import of Russian oil during a call on Saturday.
Biden administration officials on Monday asked Pelosi to hold off amid escalating concern that it was important politically for the White House to move first, the two people said. The administrative approach also gives Biden more flexibility to adjust import controls later if tensions ease or prices rise precipitously.
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 U.S. imports about 700,000 barrels per day of Russian crude and petroleum products, including fuel oil, according to the Energy Information Administration.
When other petroleum products -- such as unfinished fuel oil that can be used to produce gasoline and diesel -- are included, Russia accounted for about 8% of 2021 oil imports, though those shipments have also trended lower in recent months.
It would be far more difficult to backfill a ban for Europe, which imports about 4 million barrels per day of Russian crude and refined products, according to Eurostat data.
Russia is by far the largest exporter of crude oil to the European Union, accounting for 27% of imports in 2019, according to the European Commission.
SOURCE: Bloomberg
IMAGE SOURCE: Pixabay
