On Thursday, the US Treasury Secretary, Janet Yellen cautioned that an all-out embargo on Russian energy could ultimately cause more harm than good. An EU embargo on oil and gas imports could harm the global economy, the treasury secretary says.
She issued the warned while speaking to reporters following a meeting with Ukrainian Prime Minister Denys Shmyhal and Finance Minster Sergii Marchenko in Washington.
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Yellen questioned the efficacy of a European ban on Russian oil and gas imports, warning that it could have unintended economic consequences for the U.S. and its Western allies.
“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,” Yellen said.
Europe is the biggest purchaser of Russian crude, importing about 138 million tons in 2020 out of Russia’s total exports of 260 million tons – or roughly 53%, according to the BP Statistical Review of World Energy. Russia supplies about one-quarter of Europe’s oil needs.
Russia provided roughly 27 percent of crude oil, 47 percent of coal and 41 percent of natural gas imported by the E.U. in 2019.
The Treasury Secretary argued that the ban would actually have very little negative impact on Russia. She was quoted by AFP as saying;
“It could actually have very little negative impact on Russia, because although Russia might export less, the price it gets for its exports would go up.”
Yellen’s warning comes as major European countries, including Germany, have been calling for a complete stop to Russian energy imports. This month, the EU approved a ban on Russian coal, but could not reach an agreement on an oil and natural gas embargo.
European leaders are seeking to further penalize the Kremlin for the Feb. 24 invasion of Ukraine.
Should the EU move forward with its plans to reject Russian energy imports, European countries would almost certainly face much steeper prices for oil, coal and gas, Yellen argued. Although Russia would no longer sell such large volumes of crude to Europe, it could also find other customers in friendly or neutral countries that are willing to pay more for less.
“That would clearly raise global oil prices, it would have a damaging impact on Europe and on other parts of the world, and, counterintuitively, it could actually have very little negative impact on Russia, because although Russia might export less, the price it gets for its exports would go up,” Yellen said.
Berlin said on Wednesday that it will stop importing oil from Russia by the end of this year.
In March, the U.S. ordered a ban on Russian oil imports – something that Yellen acknowledged will push energy prices higher.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur