The EU Struggles to Rein in Trade with Russia Despite Sanctions

EU’s Sanctions Aimed at Cutting Moscow’s Revenues and Access to Technology

The European Union (EU) has imposed ten rounds of sanctions against Russia since the invasion of Ukraine in February 2022. The EU’s sanctions are aimed at cutting Moscow’s revenues and access to technology used in war. However, the impact of the sanctions is not severe enough to limit Russia’s ability to wage war against Ukraine in 2023, according to a European Parliament research note. Despite this, much trade still flows between the EU and Russia due to successful lobbying, the EU’s unwillingness to take a harder economic hit, and concerns about ripple effects on global supply chains.

Crackdown on Circumventing Imposed Sanctions

The EU wants to crack down on circumventing the already imposed sanctions and has identified the United Arab Emirates (UAE), Turkey, Armenia, Georgia, Kazakhstan, and Kyrgyzstan as potential routes. In 2021, Russia was the EU’s fifth-largest trading partner with goods exchange worth 258 billion euros. The EU mainly imported fuel, wood, iron, steel, and fertilizers from Russia. Since the invasion in 2022, the value of imports from Russia fell by half to around 10 billion euros last December. The latest data available from Eurostat shows that the EU imports 171 billion euros worth of goods from Russia starting from March 2022 until the end of January 2023.

Imports That Are Unaffected by Sanctions

The EU sanctioned imports of Russian coal and seaborne oil last year, but gas is not covered by the sanctions. Liquefied natural gas deliveries from Russia to Europe have increased since the war. There have been no sanctions against Russia’s nuclear industry, and some countries, including Hungary and Bulgaria, oppose such sanctions. The EU has imported nearly 750 million euros worth of nuclear industry products from Russia in 2022. The EU bought 1.4 billion euros worth of Russian diamonds last year, and the gem imports and Russian state-controlled miner Alrosa are not blacklisted or banned. Among raw materials unaffected by sanctions is nickel, mostly used for stainless steel production. The EU has not blacklisted Alrosa and Rosatom or Gazprombank and Russia’s second-largest oil producer Lukoil.

Calls for Cut in Russia’s Access to EU Lobbying

Transparency International has called for a cut in Russia’s access to EU lobbying and secondary sanctions to punish those aiding others already under sanctions.

Shift in Crude Oil Supply to Europe from Russia to the United States

The US has become the top crude oil supplier to Europe, overtaking Russia after the latter’s plan to weaponize its position as an energy superpower collapsed due to Western opposition to the war in Ukraine. Russia is tapping into other markets, including China and India, to make up for the shortfall in losing European customers. Analysts warn that Russia has found ways to skirt Western sanctions and get its fuel to markets, making it difficult to evaluate the financial damage to the Russian energy industry. One sign of Russia’s diminished status as an energy superpower is the futures trading, with Russia’s premier Urals crude oil hitting a two-year low while the global benchmark Brent crude trades for more than $75.

Changes in Crude Oil Imports to the EU since the Beginning of 2022 Due to Russia’s Invasion of Ukraine

Before the war, crude oil imports to the EU were stable, with Russia being the primary source of crude oil imports. From Q4 2021 to January 2022, Russia provided between 24% and 31% of total crude oil imports to the EU. The US was the second-largest supplier of crude oil to the EU, providing between 10% and 13% of total crude oil imports. Norway and Kazakhstan also supplied similar amounts of crude oil, ranging from 8% to 14% of total imports. In February 2022, Russia’s invasion of Ukraine significantly impacted crude oil imports to the EU. From February to April 2022, crude oil imports from Russia were unstable, and there were large imports in February and April, representing 33% and 30% of total imports, respectively. In May 2022, imports from Russia decreased to 12% of total imports and remained relatively stable until September 2022. From September 2022 onwards, imports from Russia decreased gradually, reaching 4% of total imports in December 2022.

Conclusion

In conclusion, despite the EU imposing sanctions against Russia since the invasion of Ukraine in early 2022, it appears challenging for the EU to entirely restrict trade with Russia. Sanctions on Russian nuclear products or gemstone mines are not on the table, while other materials such as gas are not covered by the sanctions. The US has overtaken Russia as Europe’s main source of crude oil, but Russia is still finding ways to get its fuel to markets. Despite all this uncertainty and unpredictability in the market due to geopolitical tensions and trade restrictions, the EU has managed to adapt and diversify its suppliers practically removing its dependence on Russian oil.

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