EU considers “smart sanctions” on Russian oil

Valdis Dombrovskis, executive president of the European Commission, said the EU was preparing sanctions intended to include “some form” of an oil embargo, whilst minimising economic damage to the continent’s economy, The Times reports.

The move comes amid pressure for the bloc to deprive Russia of its lucrative energy revenues. UK prime minister Boris Johnson called for the West to “take the most severe sanctions against Russia” in March 2022.

Dombrovskis said: “We are working on a sixth sanctions package and one of the issues we are considering is some form of an oil embargo. When we are imposing sanctions, we need to do so in a way that maximises pressure on Russia while minimising collateral damage on ourselves.”

The EU’s heavy reliance on Russian gas – which amounts to about 40% of EU member states’ supply – has led to internal split over whether and how to target Russian energy exports. The bloc did not join the US and UK in banning oil and gas products in March.

Dombrovskis said the precise details of the oil sanctions had not yet been agreed, but might include a gradual phasing out of Russian oil or imposing tariffs on exports beyond a certain price cap, according to The Times.

“There will be some nuances and work is ongoing,” Dombrovskis, the former prime minister of Latvia, said.

According to the International Monetary Fund (IMF), a total energy ban would slash three percent from the Eurozone’s GDP in 2023. The US was initially in favour of a blanket ban, but on 21 April Janet Yellen, US treasury secretary, warned further increases in oil prices would add to global inflationary pressures.

Sanctions would require unanimous support from the EU’s 27 member states, and Dombrovskis suggested plans could be agreed by next month. He added that Brussels is also considering measures to remove Sberbank, Russia’s largest bank, from the Swift payment system.

Dombrovskis said: “We need to be making informed decisions on how and what kind of sanctions we are imposing”.