US strikes harder at Putin, banning all Russian oil imports
Striking harder at Russia’s economy, US President Joe Biden on Tuesday ordered a ban on Russian oil imports in retaliation for Vladimir Putin’s onslaught in Ukraine. The major trade action, responding to the pleas of Ukraine’s embattled leader, thrust the United States out front as Western nations seek to halt Putin’s invasion.
Americans will feel pain, too – at the gas pump – Biden acknowledged, declaring, “Defending freedom is going to cost.”
The imports have been a glaring omission in the massive sanctions put in place on Russia over the invasion. Energy exports have kept a steady stream of cash flowing to Russia despite otherwise severe restrictions on its financial sector.
“We will not be part of subsidising Putin’s war,” Biden said, calling the new action a “powerful blow” against Russia’s ability to fund the ongoing offensive.
The conflict has roiled the energy markets, with US oil settling at US$123.70 a barrel on Tuesday, and Brent crude trading at US$127.98 a barrel. Natural gas fell to US$4.53 per 1,000 cubic feet.
Biden said the US was acting in close consultation with European allies, who are more dependent on Russian energy supplies and who he acknowledged may not be able to join in immediately. The announcement marked the latest Biden attempt at cutting off Russia from much of the global economy and ensuring that the Ukraine invasion is a strategic loss for Putin, even if he manages to seize territory.
“Ukraine will never be a victory for Putin,” Biden said.
Ukrainian President Volodymyr Zelenskyy in a tweet praised Biden’s action: “Thankful for US and @POTUS personal leadership in striking in the heart of Putin’s war machine and banning oil, gas and coal from US market. Encourage other countries and leaders to follow.”
The European Union this week will commit to phasing out its reliance on Russia for energy needs as soon as possible, but filling the void without crippling EU economies will likely take some time. The United Kingdom, which is no longer part of the EU, announced Tuesday that oil and oil products from Russia will be phased out by the end of the year.
Unlike the US, which is a major oil and gas producer, Europe relies on imports for 90 per cent of its gas and 97 per cent of its oil products. Russia supplies 40 per cent of Europe’s gas and a quarter of its oil. The US does not import Russian natural gas.
The issue of oil sanctions has created a conflict for the president between political interests at home and efforts to impose costs on Russia. Though Russian oil makes up only a small part of US imports, Biden has said he was reluctant to ban it, cutting into supplies here and pushing gasoline prices higher.
Inflation is at a 40-year peak, fuelled in large part by gas prices, and that could hurt Biden heading into the November midterm elections.
“Putin’s war is already hurting American families at the gas pump,” Biden said, adding, “I’m going to do everything I can to minimise Putin’s price hike here at home.”
Even before the US ban many Western energy companies including ExxonMobil and BP moved to cut ties with the Russia and limit imports. Shell, which purchased a shipment of Russian oil this weekend, apologised for the move on Tuesday amid international criticism and pledged to halt further purchases of Russian energy supplies. Preliminary data from the US Energy Department shows imports of Russian crude dropped to zero in the last week in February.
In 2021, the US imported roughly 245 million barrels of crude oil and petroleum products from Russia – a one-year increase of 24 per cent, according to the US Energy Information Administration.
“It’s an important step to show Russia that energy is on the table,” said Max Bergmann, a former State Department official who is now a senior fellow at the Democratic-leaning Center for American Progress.
Bergmann said it wasn’t surprising that the US was able to take this step before European nations, which are more dependent on Russian energy.
“All of this is being done in coordination, even if the steps are not symmetrical,” he said. “We are talking to them constantly.”
The White House said the ban on new purchases was effective immediately but the administration was allowing a 45-day “wind down” for continued delivery under existing contracts.
The news of Biden’s decision Tuesday was first reported by Bloomberg.
The White House announcement comes amid bipartisan pressure on Capitol Hill to ban Russian energy and impose other economic costs.
Last week, House Speaker Nancy Pelosi gave a big boost when she declared, “Ban it.”
On Monday, Democrats on the powerful Ways & Means Committee posted, then removed, an announcement on a bipartisan bill to ban Russian oil imports and slap further trade sanctions on the country, according to an aide, because of pushback from the White House to acting before Biden had made his decision.
“President Biden is finally doing what members of Congress have been pushing for all along,” Republican Senator John Barrasso, and a member of party leadership, said Tuesday. “His decision to ban Russian oil is a much-needed step to kill Putin’s cash cow.”
Said Jason Furman, a Harvard professor and former economic adviser to President Barack Obama: “The United States economy can fully handle any of the challenges associated with higher oil prices. But it will bring some challenges. We’re going to have higher prices at the pump, and there’s no way around that.”
Pelosi said the House would go forward with a vote Tuesday on legislation to ban the Russian oil imports, impose trade costs on Russia and expand sanctions authority against Russians for attacks on civilians in Ukraine.
Before the invasion, Russian oil and gas made up more than a third of government revenues. Global energy prices have surged after the invasion and have continued to rise despite coordinated releases of strategic reserves, making Russian exports even more lucrative.
As a consequence of Russia’s invasion of Ukraine, the US and international partners have sanctioned Russia’s largest banks, its central bank and finance ministry, and moved to block certain financial institutions from the SWIFT messaging system for international payments.
But the rules issued by the US Treasury Department allow Russian energy transactions to keep going through non-sanctioned banks that are not based in the US in an effort to minimise any disruptions to the global energy markets.
German Chancellor Olaf Scholz has said he opposes a European ban on Russian energy imports and that there’s no other way to meet the European Union’s needs for motor fuel, heat and electricity, and industrial use. Vice Chancellor Robert Habeck said Tuesday that when he visited Washington last week, US officials acknowledged Europe was in a different situation.
“They told me in the talks that they will neither demand nor ask that Germany do the same. But I would extrapolate from that for us, and for me, that we need as soon as possible to create the possibility to take similar measures.”