Sanctions imposed by the European Union on Russia over its invasion of Ukraine would gradually hit Moscow’s income from oil, despite not targeting Russian oil and gas exports directly, the EU’s energy policy chief said on Thursday.
The 27-country EU has imposed several packages of sanctions on Russia, including a ban on the export of specific refining technologies to Russia from Europe, making it harder and more expensive for Russia to modernize its oil refineries.
“These technologies are built in Europe, they cannot be easily placed globally by other suppliers,” European Commissioner for Energy Kadri Simson said.
“So we will see that over time there will be a depletion of revenues from the refined oil that in 2019 generated 24 billion euros of revenues for Russia,” she told a European Parliament committee.
Russia’s sales of oil and gas accounted for 36 percent of the country’s total budget last year, far exceeding initial forecasts as a result of skyrocketing prices.
The EU sanctions do not directly target Russia’s oil and gas exports. Doing that would deprive Moscow of a significant chunk of its revenue, but would also deal a major economic hit to Europe and could push up already high gas prices.
Europe imports 90 percent of its gas, some 40 percent of it from Russia.
The EU says it could cope with a partial disruption to Russia flows this winter, thanks to increased liquefied natural gas imports and relatively healthy storage levels.
But a full or prolonged halt to Russian supply would require emergency measures to cut demand, however, such as factory closures, analysts have said. All EU countries have contingency plans to respond to gas supply shocks.
Gas flows to Europe from Russia have stayed steady since the invasion, although prices have spiked on concerns of a supply disruption. Russian energy giant Gazprom has said gas exports via Ukraine are in line with requests from consumers.