veto European Union (EU) with Import of Russian oil and derivatives conclusion ineffective Achieving the goal of drastically reducing the Kremlin’s revenue to finance its war in Ukraine. The measure hurts the EU ahead of time, as economists warned in April rising energy pricesbut from 2023 it will have a limited impact on Russia’s budget, which is already diverting its exports to Russia. Chinese, India, Turkey and other countries. A veto will not stop the war in Ukraine, but it will further weaken the EU economy. inflation and aggravate inequality.
European Commission under pressure United States of America, encouraged the veto based on moral criteria: “not to finance the Russian war machine with European money”. However, it underestimated its impact on the European and world economy due to the increase in crude oil that it produced, which would increase the European Central Bank’s (ECB) interest rate increase due to the triggering of inflation in the context of the economic slowdown. .
The ban on the import of Russian oil into the EU will not come into effect for another six months and its derivatives for another eight months. But coup price and its impact on the European economy urgent. A day before the European Commission announced its plan, Brent was trading at $103 a barrel on May 3 and surpassed $124 when the move was confirmed at the May 31 summit. This June 3rd is trading at over $117, 14% more expensive than a month ago, 29% more expensive than the days before the invasion, and 67% more expensive than early June 2021 with full throttle reactivated.
record prices
European businesses and citizens pay record fuel pricestransferred to all economic sectors. Inflation in the Eurozone rose to 8.1% in May due to the 39.2% rise in energy prices and rising inequality. Without energy, inflation would be limited to 4.6%, he says. Eurostat.
First ECB rate hike they will make public debt more expensive to reduce inflation (0.25% in July and 0.25% in September). The Spanish 10-year bond is already trading at 2.36% (2 percentage points more expensive than at the start of the year). Business investments will also become more expensive and a mortgage the average will increase by more than 1,500 euros per year compared to the beginning of the year. EU governments have already allocated 86,000 million to soften the rise in energy prices to prevent a social revolt, and the new surge created by the Russian crude’s veto will consume more funds at the expense of investments.
The EU’s veto of Russian crude will also not be total, as imports via pipeline Germany, Poland, Hungary, Czech Republic Y Slovakia and naval supplies to Bulgaria and Croatia. Likewise, European shipping companies will be able to continue to transport Russian oil to non-EU countries in 2023, as requested. Greece, Cyprus Y malt.
Increase in daily production
Despite the veto of Russian crude oil accepted by the USA in March and the reduction of purchases by some European countries, Russia increased its daily production by 200,000 barrels in May to 10.2 million barrels per day. . . . This represents 700,000 barrels per day compared to a year ago. International Energy Agency (IEA). Kpler calculates that the European veto could force Russia to cut production by 10% in 2023 if it cannot increase its storage capacity.
The rise in crude oil prices more than offsets losses to European and North American buyers and allows Russia to offer discounts of $35 per barrel to India, China and other countries, as Russia’s budget is based on the selling price of oil. $44.2 in 2022 and $45 in 2023. China currently receives 1.9 million barrels per day and India 800,000 barrels per day. this current surplus Russia in the first four months of this year €89 billion, more than triple what it was in the same period in 2021, thanks to rising gas and oil prices. India became a major refinery of Russian crude oil, which was later exported to Europe as diesel and gasoline at a high price. Likewise, oil and shipping companies developed methods during these months to camouflage the Russian origin of their crude oil. Wall Street Journal.