In February, when the United States and Europe first slammed down economic sanctions on Russia in retaliation for its invasion of Ukraine, they carved out a huge exception for the country’s energy sales. Vladimir Putin’s nation is one of the world’s most important exporters of oil and natural gas, and Western leaders worried that twisting the spigot shut would cause fuel prices to soar, risking political and economic trouble in their own countries.
Now, however, the White House has decided to turn off the tap—at least here in the U.S. On Tuesday, President Joe Biden announced the United States would officially ban imports of oil and other fossil fuels from Russia. “The United States is targeting the main artery of Russia’s economy,” he said. “We will not be part of subsidizing Putin’s war.” The move comes shortly after lawmakers in Congress announced that they had struck their own bipartisan deal to bar Russian energy imports.
The U.S. is not acting entirely alone: British Prime Minister Boris Johnson also said on Tuesday that the U.K. would phase out oil imports from Russia by the end of this year, though not natural gas or coal. Aside from the Brits, however, Europe mostly seems intent to sit this new round of sanctions out. That fact makes the whole thing a bit of a symbolic half measure, since when it comes to oil and energy, Europe is a much, much more important customer than America for the Russians.
Some quick numbers: At the end of 2021, Russia exported about 7.8 million barrels a day of oil, including crude and other related products, according to the International Energy Agency. More than half of that, or a bit over 4 million barrels a day, went to various countries in Europe. Only 8 percent, or about 626,000 barrels a day were, were destined for the United States.
The Europeans are also heavily reliant on Russian natural gas for electricity and home heating fuel, meaning that a full embargo of Russian energy would be vastly more economically damaging for them. Unsurprisingly, their leaders are mostly waving away the possibility.
“Europe has deliberately exempted energy supplies from Russia from sanctions,” German Chancellor Adolf Scholz said in a statement Monday, adding: “At the moment, Europe’s supply of energy for heat generation, mobility, power supply and industry cannot be secured in any other way. It is therefore of essential importance for the provision of public services and the daily lives of our citizens.”
In the U.S., meanwhile, it’s unclear how much of a practical impact Biden’s newly announced ban will have, given that many Western companies were already shunning Russian oil, after concluding that buying it wasn’t worth the legal and publicity risk. The European oil giant Shell was a major exception. But after coming under heavy public fire for deciding to purchase Russian crude at a discount—it promised to donate its profits from the transaction to Ukrainian humanitarian aid—the company announced on Monday that it would stop purchasing oil from the country and shut down its service stations there.
It’s possible that this sort of self-sanctioning has already halted the flow of most Russian oil into the U.S.—and maybe even all of it. According to the U.S. Energy Information Agency’s preliminary data, imports from the country fell to zero during the last week of February. In short, Biden might simply be turning an unofficial embargo into an official one.
What all of this means for Americans who are already dealing with dizzying gasoline prices is a bit unclear. As Morgan Bazilian, a professor at the Colorado School of Mines, and former lead energy expert at the World Bank, said to me: “Anyone who tells you with certainty an answer to that question doesn’t know what they’re talking about, because you have to have considerable humility when it comes to the global oil market.”
With that caveat, Bazilian told me he thought Biden’s decision to make the ban official will have a “muted” impact on oil markets at this point (Texas benchmark crude was up about 3 percent on Tuesday). Prices have already surged thanks to the uncertainty caused by the Ukraine conflict, and the decision by many companies to self-sanction, forcing them to buy elsewhere. Many traders already suspected a formal U.S. ban might happen, and likely priced the possibility in before Tuesday.
But in general, going without Russian oil could still cause some headaches for ordinary Americans filling up their gas tanks, as well as for the Biden administration. Although the U.S. doesn’t get much of its oil from Russia—the country only accounted for 8 percent of our imports last year—refiners will still need to find alternatives. With supply tight around the world, that could prove tricky.
For instance, a large share of Russia’s U.S. exports were destined for refineries on the Gulf Coast that specialize in processing lower quality grades of crude, much of which came from Venezuela until the U.S. imposed sanctions on the Maduro regime years ago. The White House recently sent a delegation to Caracas to discuss restarting relations between the two countries and reviving oil sales, but the move has stirred an angry rebuke from some members of Congress, including Senate Foreign Relations Chair Bob Menendez, a Democrat from New Jersey.
The big picture, though, is that a U.S. ban on Russian oil amounts to a relatively mild escalation of the economic war that has broken out because of the Ukraine invasion. That’s why some Russia hawks hoped the U.S. would take stronger unilateral action, by using “secondary sanctions” to stop any financial institutions from financing Russian oil sales anywhere in the world.
Such a move would almost certainly be overkill at the moment, though. The U.S. and Europe are trying to pull off a difficult geopolitical balancing act, by freezing Russia out of the world economy as much as possible, without tipping themselves into crippling recessions—which would be a serious risk if they were to fully shut down Russian oil exports to defund Putin’s war machine. Biden’s move might be a half measure. But for now, a half measure feels like the right measure.
