President Joe Biden took a harsher line against Russia’s economy on Tuesday. He ordered a ban on Russian oil imports in retribution for Vladimir Putin’s aggression in Ukraine. The major trade action came in response to Ukraine’s embattled leader’s pleas. It put the US in the lead as Western nations seek to stop Putin’s invasion.
The pain will be felt by Americans as well – at the petrol pump. Biden acknowledged the expense of defending freedom by saying, “Defending freedom is going to cost.”
Russian oil imports were a glaring omission from the massive sanctions imposed in response to the invasion. Despite other severe constraints on Russia’s financial sector, energy exports have maintained a constant flow of cash coming.
“We will not be part of subsidizing Putin’s war,” Biden said. Thus, calling the new action a “powerful blow” against Russia’s ability to fund the ongoing offensive.
“Ukraine will never be a victory for Putin”
Biden stated that the US was working closely with European partners. They are more reliant on the Russian energy supply and may not be able to participate right now. The announcement represented Biden’s latest attempt to cut Russia off from much of the global economy. It guarantees that Putin’s invasion of Ukraine is a strategic failure, even if he succeeds in seizing land.
“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 will pledge this week to reduce its dependency on Russia for energy as quickly as possible. But filling the hole without damaging EU economies will take time. The U.K. is no longer part of the EU. It stated Tuesday that oil and oil products from Russia will be phased out.
Unlike the US, which is a major producer of oil and gas, Europe imports 90 percent of its gas and 97 percent of its oil products. Russia provides 40% of Europe’s natural gas and a fifth of its oil. Russian natural gas is not imported into the United States.
For the president, the subject of oil sanctions has created tension between domestic political goals and measures to inflict costs on Russia. Russian oil accounts for a minor percentage of U.S. imports. But Biden has stated that he was hesitant to impose an embargo since it would reduce supplies and raise fuel costs.
Rising prices
Inflation is at a 40-year high, spurred in large part by rising gas prices. It might affect Biden as the midterm elections approach in November.
“Putin’s war is already hurting American families at the gas pump,” Biden said. He added, “I’m going to do everything I can to minimize Putin’s price hike here at home.”
Gas prices have been climbing for weeks due to the conflict and the threat of sanctions against Russia’s energy sector. According to AAA, the average price of a gallon of gasoline in the US touched a new high of $4.17. It is up 10 cents in one day and 55 cents since last week.
Biden acknowledged that costs are growing, but warned the US energy business against “excessive price increases” and customer exploitation.
Many Western oil corporations, notably ExxonMobil and BP, broke connections with Russia and limited imports even before the US ban. Shell bought a supply of Russian oil over the weekend. Then, it apologized for the move on Tuesday in the face of international condemnation. It also vowed to stop buying Russian energy supplies in the future. As per preliminary figures from the US Energy Department, Russian crude imports fell to zero in February last week.
Important step
US Energy Information Administration says, the US purchased around 245 million barrels of crude oil and petroleum products from Russia in 2021. It was a 24 percent increase over the previous year.
“It’s an important step to show Russia that energy is on the table,” said Max Bergmann. He is a former State Department official who is now a senior fellow at the Democratic-leaning Center for American Progress.
It’s not surprising, according to Bergmann, that the United States was able to take this step ahead of Europe. Europe is more reliant 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.”
“Ban it”
The ban on new acquisitions took effect immediately, according to the White House. However, there was a 45-day “wind-down” period for current contracts to finish.
Bloomberg was the first to report on Biden’s decision on Tuesday.
The announcement by the White House comes despite bipartisan pressure on Capitol Hill to prohibit Russian energy and impose other economic penalties.
House Speaker Nancy Pelosi offered a major boost last week when she proclaimed, “Ban it.”
According to an aide, Democrats on the influential Ways & Means Committee posted, then withdrew, an announcement on a bipartisan bill to prohibit Russian oil imports and impose more trade restrictions on the country on Monday due to White House pressure against acting before Biden made his decision.
“President Biden is finally doing what members of Congress have been pushing for all along,” Sen John Barrasso, R-Wyo., 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 stated that the House would vote on legislation banning Russian oil imports, imposing trade charges on Russia, and expanding sanctions authority on Russians for atrocities on Ukrainian civilians on Tuesday.
Sanctions
Late Tuesday, however, the House postponed a vote on the bill due to differences among lawmakers over details. An aide who requested anonymity to discuss the matter says the bill was due to be voted on by the House on Wednesday.
Russian oil and gas accounted for more than a third of government revenue before the invasion. After the invasion, global energy prices soared. They have continued to increase despite coordinated releases of strategic reserves, making Russian exports even more profitable.
As a result of Russia’s invasion of Ukraine, the US and its international allies have sanctioned Russia’s main banks, central bank, and finance ministry. They have also tried to restrict specific financial institutions from using the SWIFT international payment messaging system.
However, the Treasury Department’s rules allow Russian energy transactions to continue processing through non-US sanctioned institutions. It is to avoid any disruptions to global energy markets.
Similar measures
German Chancellor Olaf Scholz has stated that he opposes a European Union restriction on Russian energy imports. Thus, claiming there is no alternative way to meet the EU’s needs for motor fuel, heat, power, and industrial use. Vice-Chancellor Robert Habeck said on Tuesday that when he visited Washington last week, American authorities understood that Europe was in a unique 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.”
Russian crude accounts for a modest percentage of total US energy imports. Hence, the US might replace it with crude from other oil-rich countries, but that could prove politically problematic.
Key U.S. senators are warning the Biden administration against negotiating an oil import deal with Venezuela’s Nicolas Maduro regime.
“The Biden administration’s efforts to unify the entire world against a murderous tyrant in Moscow should not be undercut by propping up a dictator under investigation for crimes against humanity in Caracas,” said Sen. Bob Menendez, D-N.J., the chairman of the Foreign Relations Committee, in a statement late Monday. “The democratic aspirations of the Venezuelan people, much like the resolve and courage of the people of Ukraine, are worth much more than a few thousand barrels of oil.”