Pleas to Stop Buying Russian Oil and Gas Go Unheeded

Even now, on the fifth day of the Russian invasion of Ukraine and Kyiv bracing for the worst, the West has continued purchasing the oil and gas that Moscow is desperate to sell — pocketing hundreds of millions of dollars daily to subsidize its war machine.

Washington and Brussels have carved out loopholes big enough for an oil tanker in their current sanctions policy, allowing the trade to continue. Western officials have also worked the phones, reassuring traders — and their banks — they can continue buying — and paying for — Russian oil and gas.

But Kyiv is pleading for it to stop. “We insist on a full embargo for Russian oil and gas,” Ukrainian Foreign Affairs Minister Dmytro Kuleba tweeted over the weekend. “Buying them now means paying for the murder of Ukrainian men, women and children.”

As with every other action that only a few days ago seemed unpalatable and unlikely — targeting the Nord Stream 2 pipeline and SWIFT foreign-currency system, or supplying offensive armament — the oil weapon is looming as an economic punishment that could provoke a dangerous military response.

Russia exports about 8 million barrels a day of crude, refined petroleum products and other oil liquids, a significant chunk of global demand of about 100 million barrels a day. About two-thirds of the Russian supply goes to industrialized nations in Europe, North America and Asia.

Germany is worried Europe won’t have enough gas to make it until the spring, and blackouts may follow. The U.S. fears oil prices will jump to $150 or even $200 a barrel, just ahead of its midterm elections. In Washington and Berlin, the message is almost unanimous: Sanctioning Russian oil and gas will hurt the West more than Moscow, and it’s unlikely to deter Vladimir Putin. For now, it won’t happen. John Arnold, a famed former commodity trader, summarized that school of thought: “As much as the world is mad at Putin, that is not a price the West is willing to pay.”

Others appear open to the idea, however. U.K. Foreign Secretary Liz Truss over the weekend floated the prospect of setting caps on purchases of Russian oil, progressively reducing them. Ironically, that sounds exactly like the 1973 Arab oil embargo, which set a 5% monthly output reduction. Other Western officials are asking, if not now, when?

I can’t see the status quo of the energy trade lasting forever. Unless the Ukrainian-Russian talks yield some quick results, the gruesome photographs and videos that will inevitably follow a Russian push into the biggest Ukrainian cities, including Kyiv, will harden Western public opinion. If the war drags on, it’s a matter of when, rather than if, the energy trade gets sanctioned. Already some European refiners have stopped buying Russian crude, self-sanctioning Russian oil. Even with the White House encouraging oil traders to keep going, moving Russian petroleum, particularly seaborne flows, is increasingly difficult.

Canada on Monday became the first G7 nation to brandish the oil weapon. Prime Minister Justin Trudeau announced his country won't import more Russian crude, a largely symbolic step as Canada imports just a trickle of Russian oil. But as Trudeau said, "this measure sends a powerful message."