Russia is the world’s largest oil exporter and the EU’s largest oil supplier. Since the February 2022 Russian invasion of Ukraine, the EU has tried to become less reliant on Russian oil and gas. However, as the EU imports 25% of its oil from Russia, the EU faces a large challenge in securing alternative suppliers.
Key Judgement 1: It is highly unlikely that the EU will impose a unilateral ban on Russian oil in the next 12 months.
- Russia is the world’s largest oil exporter, responsible for 8% of the world’s supply. Russia is also Europe’s biggest oil supplier, providing more than a quarter of EU oil imports. In 2020, the EU imported 9.3 million barrels per day (mb/d) of crude oil and 5.6 mb/d of refined oil products. Around 8 mb/d of imported refined products is used for transport, 3.5. mb/d for heating, and 2 mb/d as feedstock for the chemical industry [source].
- Some Member States of the EU are particularly dependent on Russian oil. For instance, in 2021, Germany purchased 34% of its total oil imports from Russia. Moreover, countries near the southern route of the Druzhba pipeline are especially dependent on Russian oil. In 2021, Russia accounted for 96% of all of Slovakia’s oil imports, 58% of Hungary’s, and 50% of the Czech Republic’s [source].
- No other trading partner of the EU comes close to Russia’s share of oil imports. This would make it extremely difficult to replace Russian oil within a 12 month period. According to experts, imposing embargoes on Russian oil may cause a spike in prices and lead to severe negative economic consequences at a continental level [source].
- Embargoes imposed on Iraq in the 1990s, and Iran and Venezuela in the 2010s, were counteracted by additional supplies from alternative producers, which minimised the embargoes’ impacts on pricing indexes. However, today, alternative suppliers in the US and Saudi Arabia have little incentive to raise their output to mitigate the effects of a potential embargo on Russian oil by expanding trade in European markets. This is due to existing lucrative contracts and infrastructure in the Middle East and Central and South America [source].
Key Judgement 2: It is likely that gas imports from the US will increase in the next 12 months.
- In 2021, the EU imported 155 billion cubic meters of natural gas from Russia. Russian imports account for around 45% of the EU’s total gas imports and 40% of its total gas consumption [source].
- The EU has committed to reducing natural gas imports from Russia by two thirds by the end of 2022. At the same time, the US has pledged to increase its exports to the EU in order to help it decrease its dependence on Russia. In addition, the US pledged to send 50 billion cubic meters of gas to Europe annually [source].
- The share of American exports to Europe increased from 7% in 2017 to 30% in 2021. In the last year, the US exported 22 billion cubic meters of natural gas to the EU, the highest level ever traded between the two [source].
Key Judgement 3: It is likely that EU countries will slowly decrease their dependence on Russian oil and gas over the next 12 months.
- Although at present there is no embargo on the importation of Russian oil into the EU, many companies have already stopped investing in Russian crude oil, oil products, and gas supplies [source]. This is mainly because many Western actors fear sanctions and negative publicity for purchasing Russian oil [source].
- Proposals have been made in Brussels for the gradual phasing out of Russian oil and gas over a six month period to run in the latter half of 2022 [source]. In addition, the US has already banned Russian oil imports, and the UK said that it would phase out Russian oil by the end of the year [source].
Intelligence Cut-Off Date: 6th May 2022