A blow to Friendship: Europe approved a new package of sanctions against Russia
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The EU wants to cut off the supply of petroleum products and eliminate loopholes to circumvent sanctions
EU Permanent Representatives agreed on the 11th package of anti-Russian sanctions. Polish Ambassador to the EU Andrzej Sadosia said that it would include a ban on oil supplies via the southern branch of the Druzhba pipeline. In addition, the restrictions will affect 30 “economic entities that circumvent sanctions and support Russian military efforts” and 70 citizens. How much the new unfriendly step will affect the economies of Russia and Europe, MK discussed with experts.
The introduction of restrictive measures on oil supplies via the Druzhba pipeline is a new step in the aggravation of relations between the EU and Russia. Previously, sanctions did not apply to pipeline imports of Russian oil. There were bans on other types of supplies: in particular, on December 5, 2022, the European Union banned the sea transportation of crude oil from our country, and on February 5, 2023, the import of oil products fell under the same restrictions. However, all this time it was allowed to buy pipeline Russian oil until the EU Council imposes a corresponding ban.
However, relations between Russia and Europe worsened even without official bans, which affected the trade turnover. Thus, in March, Eurostat reported that the supply of hydrocarbons of Russian origin to the region fell to 1.4 million tons. The monthly volume of purchases turned out to be 90% less than the average in 2019-2022, when it reached 15.2 million tons.
And now, in the 11th package of sanctions, the EU authorities decided to inflict another blow on the export of Russian hydrocarbons and completely cut off pipeline supplies. Recall that the southern branch of Druzhba is the only one that now transports Russian-made raw materials to Europe. Hungary, Slovakia and the Czech Republic receive oil via this route. There is also a northern branch, it comes from Kazakhstan, which also sells oil to the EU countries.
The actions of the European authorities are damaging the economies of the EU countries, but such trifles do not seem to bother anyone. Thus, according to Tatiana Skryl, Associate Professor of the Department of Economic Theory of the Plekhanov Russian University of Economics, the closure of the southern branch of the pipeline will lead to a shortage of oil and oil products, primarily in Hungary, Slovakia and the Czech Republic.
If Prague and Bratislava are opposed to Russian policy, then Hungary, on the contrary, is loyal to us, although it has to be in the wake of the measures taken by the EU leadership.
The new package of sanctions can partly be indirectly perceived as leverage on the Hungarian government. Moreover, refineries and related infrastructure in these countries were built and adjusted to the chemical composition of Russian oil. The change of supplier will mean the need to modernize the current production, which will require impressive investments. Otherwise, the factories will stop their activities and be closed, the expert is sure.
– The source of information in the person of the Ambassador of Poland is extremely unreliable, but in any case, if oil supplies through Druzhba are interrupted, European countries will suffer first of all, which will be left without Russian oil, – says Artem Tuzov, director of the corporate finance department at IVA Partners Investment Company . – The budget of the Russian Federation will practically not suffer on the annual horizon. The very number of the sanctions package hints that the sanctions have ceased to affect our country…
Western countries are simply building a new “iron curtain”, the result of which will be the deterioration of the EU economy. Hungary is critically dependent on the supply of Russian hydrocarbons.
– The rise in energy prices is having a painful effect on the Hungarian economy. In May 2023, inflation in the country amounted to 21.5%, – Maxim Osadchiy, Head of the Analytical Department of BKF Bank, continues the topic. – It is clear that the cessation of Russian oil supplies via the Druzhba pipeline will cause a significant blow to the Hungarian economy, so Hungary may block the inclusion of this item in the 11th package of EU sanctions.
For Russia, the damage as a whole from this package is estimated by the European Commission at the level of 11.4 billion euros, probably per year. For comparison, Russia’s nominal GDP in 2022 was about 1.7 trillion euros. In general, reducing the EU’s dependence on Russian oil could lead to a reduction in the oil price ceiling from the current level of $60 per barrel, which could indeed have a negative impact on the Russian budget. If the sanctions did not work, they would not have been introduced, but the persistence with which the EU authorities hit the members of their own Union defies any economic logic.
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