European Commission President Ursula von der Leyen said Wednesday the measures would form part of a sixth round of sanctions against Russia over its invasion of Ukraine.
“We now propose a ban on Russian oil,” she said during a speech to the European Parliament. “Let’s be clear: it will not be easy. But we simply have to work on it. We will make sure that we phase out Russian oil in an orderly fashion, to maximize pressure on Russia, while minimizing the impact on our own economies.”
Crude oil supply would be phased out within six months, and imports of refined oil products by the end of 2022, she added.
News of the proposal, which still needs the approval of all EU member states, boosted crude oil prices. Brent futures, the global benchmark, rose 2.4% to $107 a barrel, while US oil futures were up 2.7% at $105 a barrel at 3.30 am ET.
Oil prices have risen by about 40% since the start of the year on fears that Russia’s invasion of Ukraine will deliver a supply shock, fueling inflation and piling pressure on European economies.
Hungary recently reiterated its opposition to an oil embargo, and Slovakia is reportedly seeking an exemption.
Russia is the world’s second-biggest crude oil exporter, and last year accounted for about 27% of EU oil imports. The United States, Canada, United Kingdom and Australia have already banned imports.
Those sanctions — and a de-facto embargo by some European oil refineries and traders — have already hit the price of Russian oil. Its benchmark Urals crude is now trading at a $35 per barrel discount to Brent, compared with less than $1 before the invasion.
Some customers in Asia are reportedly buying more Russian oil but not in sufficient volumes to offset the loss of Western buyers.
“Russia’s ability to redirect all unwanted cargoes from the West to Asia are limited, meaning that, in the case of embargoes, Russia will be forced to cut production further as it lacks storage capacity for extra crude volumes,” analysts at Rystad Energy wrote in a research report on Monday.
The International Energy Agency recently estimated that Russia’s oil supply would fall by 1.5 million barrels per day in April as demand falters, with those losses accelerating to 3 million barrels per day this month.
But the surge in global prices for oil and natural gas means Moscow continues to earn vast amounts of money from its energy exports. Rystad estimates that Russia will collect more than $180 billion in energy tax revenues this year — up 45% on 2021 — despite the oil production cuts.
The Society for Worldwide Interbank Financial Telecommunication, based in Belgium, must comply with EU regulations. With no globally accepted alternative, it is essential plumbing for global finance.
“We hit banks that are systemically critical to the Russian financial system and Putin’s ability to wage destruction,” von der Leyen said. “This will solidify the complete isolation of the Russian financial sector from the global system.”
Three big Russian state-owned broadcasters will also be banned from Europe’s airwaves.
— Anna Cooban and Julia Horowitz contributed to this article.