EU Proposes Sixth Russian Sanctions Package, Targets Oil And Sberbank

May 5, 2022
European Commission president Ursula von der Leyen has presented the EU’s sixth package of sanctions against Russia, which includes specific provisions banning oil imports and Russia’s largest bank.

European Commission president Ursula von der Leyen has presented the EU’s sixth package of sanctions against Russia, which includes specific provisions banning oil imports and Russia’s largest bank.

Speaking to the European Parliament on May 4, von der Leyen said the EU will propose a blanket ban on all imports of Russian oil products.

“This will be a complete import ban on all Russian oil — seaborne and pipeline, crude and refined,” she said.

Noting the high dependency on Russian imports among some member states, von der Leyen said the EU plans to introduce a ban on crude oil products within six months and a ban on refined products by the end of 2022.

“We will make sure that we phase out Russian oil in an orderly fashion,” she said, “in a way that allows us and our partners to secure alternative supply routes and minimise the impact on the global market.

“It will not be easy, but we simply have to do it.”

Josep Borrell, the EU’s top diplomat, was quoted as saying that the bloc hopes to pass the sixth round of sanctions next Monday (May 9) at the next meeting of the EU Foreign Affairs Council.

A long-awaited oil ban

Since the beginning of the Russian invasion of Ukraine on February 24, the EU has been accused of funding both sides of the war by continuing to purchase Russian energy.

In March, EU leaders met in Versailles, France, where they agreed to phase out Russian fossil fuels by way of future sanctions.

The first concrete action was taken on April 8, when the EU imposed a ban on EU imports of coal from Russia as part of its fifth round of sanctions.

However, by the EU’s own admission, coal exports to the EU are of relatively little importance to the Russian economy, generating revenues of about €4bn annually.

In contrast, loss of oil export revenue represents a major threat to Russia’s economy. According to the Centre for Research on Energy and Clean Air (CREA), in the two months since the start of the war in Ukraine, the EU has already spent more than €20bn on Russian oil imports.

Banning these imports will mark a major shift in relations between the bloc and Russia. However, given such high dependencies on Russian oil among EU member states, it is difficult to see how alternative sources could be prepared within six months.

According to the International Energy Agency (IEA), Germany is the EU’s largest buyer of Russian oil. In 2021, the country imported more than 550,000 barrels of Russian oil per day, which accounted for 34 percent of its total oil imports.

Other smaller EU nations import less Russian oil in absolute terms, but much more in relative terms. For example, Russia supplied 63 percent of Poland’s total oil imports in 2021, 80 percent of Finland’s and 83 percent of Lithuania’s.

But proportionally, Europe’s largest importer of Russian oil by far is Slovakia, which in 2021 imported 96 percent of its oil from Russia.

Alongside Hungary, Slovakia has pressed for an exemption from any future EU ban on Russian oil, with both countries threatening to veto such a move last week.

Although it was notable that von der Leyen did not address this issue in her speech, an unnamed EU source quoted by Reuters has claimed that both countries will be granted exemptions that will allow them to continue buying Russian crude oil until the end of 2023 under existing contracts.

Sberbank on the ropes

The second key element of the EU’s latest sanctions proposals is its focus on Sberbank, Russia’s largest bank by asset value.

Noting that Sberbank alone accounts for 37 percent of the entire Russian banking sector, von der Leyen said the EU will ensure that Sberbank is locked out of international financial markets by cutting off its access to SWIFT.

“We will finally deSWIFT Sberbank,” she said. “And we will deSWIFT other major banks in Russia.

“By that, we hit banks that are systemically critical to the Russian financial system and Putin's ability to wage destruction. This will solidify the complete isolation of the Russian financial sector from the global system.”

As reported by VIXIO in March, Sberbank was left out of the EU’s previous SWIFT lockouts, despite its relative importance to the Russian economy.

Instead, the EU announced that it would disconnect seven Russian banks from SWIFT: Bank Otkritie; Novikombank; Promsvyazbank; Rossiya Bank; Sovcombank; Vnesheconombank (VEB); and VTB Bank.

But even though Sberbank was spared, it issued a press statement several days later saying that it would start to withdraw from the European market.

The decision was taken voluntarily, the bank said, due to safety concerns and an “exceptional outflow” of funds from its European subsidiaries.

In other news, the Swiss Financial Market Supervisory Authority (FINMA) announced that it has taken protective measures at Sberbank’s Swiss subsidiary.

These include a deferral of obligations from deposits and a ban on payments and transactions until May 31.

FINMA said it imposed the measures due to the “more stringent international sanctions environment” and the “resulting ongoing risks for the bank's liquidity situation”.

According to FINMA, Sberbank (Switzerland) AG is an indirect subsidiary of Sberbank Russia and is not directly connected to Sberbank Europe AG. It specialises in commodity trade finance and serves only around 70 business clients.

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