Russian oil embargo could tank world economy, US warns

A European blockade of Russian oil imports could cripple western economies and even help the Kremlin by boosting fossil fuel prices, Washington has warned.

The United States and European Union are holding talks over measures to reduce Europe’s dependency on Russian energy supplies and phase out oil imports.

The International Energy Agency (IEA) has advised European consumers that cutting personal energy consumption would reduce reliance on Russia, potentially cutting the use of enough oil to fill 120 super tankers.

Next week the EU will begin negotiations on phasing out oil imports that have earned about €13 billion in revenues for Russia since the invasion of Ukraine began in February.

Janet Yellen, the US treasury secretary, yesterday urged the EU to be cautious to avoid a repeat of the 1970s oil shock, when soaring prices tipped the global economy into recession.

 “Medium-term, Europe clearly needs to reduce its dependence on Russia with respect to energy, but we need to be careful when we think about a complete European ban on, say, oil imports,” she said. “If we could figure out a way to do that without harming the entire globe through higher energy prices, that would be ideal. And that’s a matter that we’re all trying to get through together.”

Wendy Sherman, US deputy secretary of state, is holding talks in Brussels this week and has echoed the warning that higher oil prices, caused by sanctions squeezing supply, could actually benefit Putin by increasing Russia’s energy revenues.

 “You have to figure out how you can do something that is effective without driving up the income that Vladimir Putin will get. So that is something everyone is working on,” she said.

EU negotiations on stopping oil imports will be difficult and any future ban is unlikely until the end of year at the earliest following Germany’s national timetable for phasing out Russian supplies.

Countries that depend heavily on Russia, such as Hungary, which gets 64 per cent of its supply from Russia, will demand a phased timetable, particularly for pipelines and subsidies to allow the switch to alternative supply sources without triggering a recession.

The EU and G7 are also looking at ways to increase oil output elsewhere, such as the Middle East, to ease price increases.

To compensate for the failure of European countries to cut Russian energy imports, especially after Russia’s annexation of Crimea in 2014, the IEA and EU have asked people to cut their personal energy use.

Europeans have been asked to drive less, turn down their air conditioning this summer and work from home three days a week.

According to a ten-point point IEA plan, backed by the European Commission, households could save up to €500 a year, especially in cities, by cutting personal energy use.

Fatih Birol, the head of the IEA, called on Europeans to take “easy-to-follow steps that with little or no discomfort on our part can reduce the flow of money to Russia’s military”.

 “Faced with the horrendous scenes of human suffering that we’ve seen following Russia’s invasion of Ukraine, people in Europe want to take action,” he said. “Using less energy is a concrete way to help the Ukrainian people — and to help ourselves.”