Europe is set to ramp up its oil war against Russia with products ban

Europe is once again poised to ratchet up the pressure on Russia’s oil revenues, seeking to deplete President Vladimir Putin‘s war chest as the Kremlin’s nearly year-long onslaught in Ukraine drags on.

But some energy analysts are worried that the proposed measures could cause “significant market dislocations.”

The European Union’s ban on Russian oil product exports is slated to kick in on Feb. 5. The embargo will take effect exactly two months after the West took by far the most significant step to curtail fossil fuel export revenue funding Russia’s war.

The Group of Seven implemented a $60 price cap on Russian oil on Dec. 5. That came alongside the EU’s import ban on Russian seaborne crude, as well as the corresponding bans of other G-7 partners.

It is thought that the EU’s forthcoming embargo on Russian petroleum products will be both more complex and more disruptive than what has come before.

As part of the European Union’s sixth package of sanctions against Russia, adopted in June last year, the 27-member bloc imposed a ban on the purchase, import or transfer of seaborne crude oil and petroleum products from Russia.

The restrictions on Russian crude oil took effect on Dec. 5, while the measures targeting Moscow’s refined petroleum products will apply from Feb. 5.

Analysts at political risk consultancy Eurasia Group warned the EU’s imminent ban “will probably have a more disruptive effect than previous EU crude-import sanctions.”

Concerns about further supply disruptions come amid talks regarding further oil price caps. The EU and its G-7 allies are reportedly considering a $100 per barrel price cap on premium Russian oil products like diesel and a $45 cap on discounted products like fuel oil and industrial lubricant oil.

The thresholds, first reported by Bloomberg last week, are also expected to take effect on Feb. 5, although the figures may change during talks between member states and the bloc’s allies.

A spokesperson for the European Commission, the EU’s executive arm, said discussions between member states were ongoing but declined to provide any further details.

“If it is introduced, it would be last minute, potentially creating more confusion in the market,” analysts at Eurasia Group said.