US companies have been given 45 days to adjust to the ban. Major oil companies like ExxonMobil, BP and Shell have announced plans to cease Russian operations. Shell said it would stop all spot purchases of Russian crude after criticism for a purchase on 4 March.

The European Commission has pledged to reduce European Union (EU) dependency on Russian gas by two thirds this year and intends to fully phase-out its use of Russian oil and gas ‘well before 2030’. In 2021, the EU imported around 45% of its gas from Russia and about 25% of crude purchases, according to the International Energy Agency (IEA). The 27-member bloc had been heavily criticised for being too reliant on Russia for energy, especially in the wake of the Russian invasion on Ukraine.

UK Business Secretary Kwasi Kwarteng, said the government is giving businesses enough time to find new sources of supply, and maintained that the UK has ‘sufficient reserves’. The UK is exploring options for a ban on Russian gas, which accounts for 4% of supplies. About 20% of diesel on UK forecourts is said to come from Russian crude, according to The Times.

Energy prices are running at a record high. The Brent crude oil price soared to $139/b on Monday 7 March and is now running at about $129/b, while natural gas prices in Europe more than doubled to 800p/therm at peak. Oil prices have surged more than 30% since Russia invaded Ukraine. ‘We are at the beginning of a shockwave in energy markets,’ says Roger Diwan, Vice President of Financial Services at S&P Global.

The US imported nearly 700,000 b/d of crude oil and refined products last year, according to the US Energy Information Administration (EIA). Russian crude accounted for 3% of US imports and petroleum products accounted for about 8% of oil imports in 2021. Although shipments have been trending lower in recent months, says US analyst Kepler.

International talks

UK Prime Minister Boris Johnson has held talks with the Canadian, French, German and Dutch Prime Ministers this week. He called for a ‘step by step’ approach and said nations have to work together to secure alternative sources of supply. Johnson said on Tuesday 8 March that the world could not simply stop using Russian oil and gas but could accelerate the transition away from it. ‘The UK will move away from dependence on Russian oil throughout this year, building on our severe package of international economic sanctions,’ he said.

However, the response to oil and gas sanctions varies, while President Volodymyr Zelensky of Ukraine pleads with western allies to cut off imports.

Canada’s Prime Minister Justin Trudeau said a ban of Russian fossil fuels was ‘very much on the table’. But Dutch Prime Minister Mark Rutte warned that forcing a boycott would have enormous consequences. German Chancellor Olaf Scholz cautioned against banning Russian oil and gas. He said Europe had ‘deliberately exempted’ Russian energy from sanctions because its supply cannot be secured any other way at the moment. But Germany is having to rethink its energy policy, with coal and nuclear power likely to play a bigger role in the next few year.

Johnson insists that the US and European nations are ‘moving very, very fast’ in terms of discussions about banning Russian oil imports, and talked of boosting North Sea production. ‘We are looking at the possibility of using more of our hydrocarbons [with more licences for North Sea production according to UK Business Secretary Kwasi Kwarteng]… but that doesn’t mean we are abandoning our commitment to reducing CO₂’, he said.

Russian tankers already face challenges

Russia’s oil and gas imports have for the most part been spared from sanctions to date. However, a tanker carrying Russian LNG docked at the French port of Brittany on Saturday 5 March after UK dockers at the Isle of Grain refused to unload it. Lloyds List estimated that, on average, 829 Russian-affiliated vessels call in UK and EU ports. International scrutiny is likely to focus on 429 internationally trading vessels over 10,000 dwt. Nearly 20% of these are crude oil tankers, 16% are bulk carriers and 12% product tankers. 

European Commission President Ursula van der Luyen recognises the difficulty of implementing a Russian oil and gas embargo in the European Union and told CNN: ‘We are just discussing in the European Union a strategic approach, a plan, how to diversify our energy supply.’

Ukraine President Volodymyr Zelensky and Foreign Affairs Minister Dmytro Kuleba have both called for a Russian fuel oil embargo.

Slow release of strategic reserves

There is still the thorny issue of strategic reserves. On 1 March, the US and 30 countries agreed to release 60mn barrels of oil from global strategic reserves to stabilise the international energy market. However, the move failed to calm fears about supply disruption. The coordinated decision is the fourth such effort in the IEA’s history. US Energy Secretary Jennifer Granholm said the US – which released 30mn barrels – ‘was prepared to take additional measures if conditions warrant’.

According to the IEA the 60mn barrels release accounts for 4% of emergency stockpiles of 1.5bn barrels globally. This is only equivalent to about six days of Russian crude production, or about 12 days of Russia’s exports. The release is considered to be only a modest buffer in the short term, say energy traders.

Historically, Europe relies on Russia for about one third of its oil and gas imports. Meanwhile, Russian President Vladimir Putin also threatens to reduce or cut off gas supplies.