Russia is ready to send any supplies rejected by European countries to other regions like Asia, if the European Union (EU) imposes an oil embargo, the country’s Deputy Prime Minister Alexander Novak has warned.
He argued that Europe, which depends on Russia for around a quarter of its crude imports, would have to find substitute supplies that would be more expensive.
This follows Russian Foreign Minister Sergei Lavrov earlier this month challenging the West to impose an oil ban.
He said, “Let the West pay more than it paid the Russian Federation, and explain to its people why they should be poorer.
The European Commission yesterday unveiled 210 billion euros for Europe to end its dependence on Russian fossil fuels by 2027 and accelerate its transition to renewable energy.
The EU is also moving towards a phasing out of Russian oil supplies and wants to include the measure in the sixth round of sanctions after announcing restrictions on coal imports from the country two months ago.
However, Hungary continued to refuse support, with the sanctions requiring the unanimous backing of the trading bloc.
EU negotiators and the Hungarian government have been negotiating in recent days over a potential financial settlement to offset economic hardship from the Russian oil cut.
The figures proposed would be close to one billion euros.
Europe is Russia’s main buyer, which means that as painful as phasing out 4 million barrels a day from Russia would be for the EU, it would also be a blow for the Kremlin.
Since Russia’s invasion of Ukraine in February, the EU has spent 28 billion euros on Kremlin-backed oil supplies, far more than its pledged aid to Ukraine.
Last week Callum Macpherson, Head of Commodities at Investec, said AM City that Russia would have great difficulty finding new buyers willing to take oil in the same volumes as European buyers.
This means that oil supplies could leave the market and push prices up again – which are already high above the $100 cap.
He said: “If the ban is comprehensive and introduced quickly, it would be a real challenge for Russia to redirect it and in doing so, it would remove crude from the global market, leaving the EU to compete with existing consumers from other sources of crude – this will inevitably mean higher prices as some consumers will have to be shut out of the market.
Craig Erlam, principal analyst at OANDA, added: “I think we are going to see a ban, the question is how it will be phased in and whether it will be particularly effective as a result. The longer they take to implement the ban, the more opportunity Russia will have to find alternative markets. »
Gazprom customers give in to pressure and offer payments in rubles
The EU has so far avoided sanctions on Russian gas, with the bloc depending on Russia for 40% of its imports.
Only Lithuania acted unilaterally to implement an embargo, with the mainland concerned about potential supply shortages this winter without alternative supplies.
Along with his optimistic tone towards Russian oil, Novak revealed that half of Gazprom’s 54 clients have opened accounts at Gazprombank, the Russian deputy prime minister revealed.
Related: Failure to Implement Russian Oil Ban Could Send Oil to $65
The Kremlin forces buyers of Russian gas to pay in rubles, while almost all European supply contracts have been concluded in euros or dollars.
Last month, Russian President Vladimir Putin enacted legal requirements forcing ‘unfriendly’ foreign customers to pay in rubles, in a bid to bolster the country’s currency and in retaliation for heavy Western sanctions following the invasion of Iran. Ukraine by country.
Through an obscure payment system, European companies must open accounts at Gazprombank and transfer euros or dollars which are then converted into rubles before the transaction.
The European Union (EU) has condemned Russia’s demands, but reached a compromise with Western companies – allowing them to trade Russian gas on the condition that they declare the deal complete once they have transferred euros or dollars to a Gazprombank account.
Last month, Russia cut off gas supplies to Bulgaria and Poland in April after the two countries refused to meet its demand that European buyers start paying for Russian gas in roubles.
There is growing speculation that Finland could be next, as the country’s state-owned energy supplier, Gasum, has also refused to switch to the new regime.
It revealed this week that it would take its dispute over ruble payments with Russia’s Gazprom Export to arbitration.
The country recently announced its intention to join NATO, which further upsets the Kremlin.
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