Good morning and welcome to Europe Express.
The Russia sanctions marathon continues. After two days of meetings, EU ambassadors approved the fifth package last night, due to be published in the Official Journal later today. We will examine why some EU officials expect this oil embargo is a matter of time and what form it might take.
In addition to the sanctions, the EU foreign ministers will discuss the so-called Global Gate Strategy (originally designed to offset Chinese investment in Africa). I’ll update you on why some capitals are likely to call for a policy shift to counter Russian influence in Eastern Europe and Central Asia.
And with the first round of the French elections approaching this Sunday, let’s see how Marine LePen channels Brexit slogans to win the presidency.
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Josep Borrell, the EU’s top diplomat, said yesterday the question now is when rather than if the EU will impose a blockade on Russian oil, he writes Sam Fleming in Brussels.
The issue will be up for debate at Monday’s Foreign Affairs Council meeting, Borrell said, adding: “Sooner or later – I hope sooner – it will happen.”
Preparations for an oil ban, possibly as part of a sixth package of EU sanctions, reflect a clear hardening of sentiment among member states, fueled by reports of atrocities committed by Russian forces in Bucha and other occupied territories.
The political pressure to act is growing. In a symbolic vote yesterday, the European Parliament overwhelmingly endorsed an immediate full embargo on Russian oil, coal, gas and – as a possible sign of the future – nuclear fuel.
But the devil of any new oil sanction is inevitably in the detail. The coal ban, which the EU wants to enforce, is only likely to come into force after a three-month transition phase, as for example the draft EU plans for the fifth round of sanctions envisage.
Questions about any oil embargo include which Russian oil products will be affected, how long a phase-in period will last, and whether it will be a full or partial ban. There will also be the question of an accompanying release of European strategic oil reserves to dampen the impact of the measure.
Officials also have ideas such as levying tariffs on Russian oil instead of an outright ban as planned for coal, or allowing some of the money due on crude oil imports to be placed in an escrow account to be used to help rebuild Ukraine. The latter is a concept favored by Estonia but may struggle to gain widespread support.
The EU is far behind the US on energy blockades, as exactly a month ago Joe Biden signed an executive order banning imports of Russian oil, liquefied natural gas and coal into the US.
But then the EU is also much more exposed to Russian energy. Politicians are under mounting pressure from voters as energy prices rose nearly 45 percent year-on-year in March — and member states are spending billions to offset some of the pain at the pump.
The risk, according to some officials, is that any major new price surge triggered by fresh sanctions could end up undermining public support for the broader range of EU measures in response to Russia’s invasion of Ukraine.
An oil boom would also be of great importance for Russia. Research by the Institute for International Finance in late March found that the EU, UK and US account for almost 55 percent of Russia’s oil and petroleum products exports by volume.
If the EU takes action against Russian crude oil, it will by no means mean the end of the road in terms of energy sanctions. Some Member States are already questioning whether nuclear fuel restrictions should be part of the sanctions regime.
And then there’s the most controversial energy sanction of all – restrictions on natural gas.
Valdis Dombrovskis, executive vice-president of the commission, insisted this week that the EU could handle any ban on Russian gas. However, according to a person familiar with the matter, an internal analysis by the Commission services points to a massive 2pp drop in GDP growth expectations due to a disruption in Russian gas supplies.
Given the outsized role Russian gas imports play in some EU economies, such a move would be hugely divisive among member states. But with the barrage of somber news out of Ukraine, the gas sanctions debate will be very hard to avoid.
Chart du Jour: Contrasting reactions
The country hardest hit by a complete halt to Russian fossil fuel imports is Lithuania, which has already acted and stopped its gas imports from Russia and is one of the loudest advocates of an oil and gas embargo on Moscow. Hungary, on the other hand, has agreed to pay for Russian gas in rubles, Vladimir Putin’s proposed retaliation for Western sanctions. (More here)
Last year the EU announced a so-called global gateway strategy designed (if you read between the lines) to counter China’s “Belt and Road” investment initiative in Africa and other parts of the world.
Now some capitals are calling for the investment plan to be refocused on countries where Russia is exerting its influence, particularly in Eastern Europe and Central Asia.
Shifting investment priorities to China and Russia would “pay the biggest geopolitical dividend” today, an EU diplomat said.
Some are even offering the opportunity for parts of the €300 billion investment to plan to be used for Ukraine’s post-war reconstruction – although many others point out that dedicated recovery funds, including through the sale of confiscated Russian assets, might be better suited to the task.
The idea of the realignment also faces some opposition from officials, who point to the reputational damage the bloc will suffer on the African continent less than two months after an EU-African Union summit at issue investments and the global gateway strategy. Turning away from Africa “is sure to see us losing hard-won allies at the speed of light,” said an EU official.
For its part, the European Commission says the strategy is not necessarily about focusing on one geographic region, but rather about embracing the whole world.
“It’s about how the EU can reduce dependencies while ensuring that Europe remains a connected continent,” said Commission spokeswoman Nabila Massrali.
She added that individual member states may wish to focus investment strategy on specific areas “in today’s geopolitical context”. However, the discussion is unlikely to come to a conclusion on Monday, Massrali said.
Far-right leader Marine Le Pen, President Emmanuel Macron’s main rival in the forthcoming French presidential election, has urged voters to “take back” France by voting for her on Sunday — echoing the successful 2016 Brexit referendum campaign that led to the UK exit from EU, writes Victor Mallet in Perpignan.
At a pre-election rally yesterday in the southern French city of Perpignan, one of the few in France to be led by a mayor of her anti-immigrant Rassemblement National party, Le Pen appealed to her supporters to ensure they actually cast their vote give up the choice.
“Become a citizen again,” she said. “You don’t abstain in a presidential election. Take back control!”
Opinion polls suggest that Le Pen and Macron will win the spots as two finalists in Sunday’s first round, and that the far-right leader has a chance of defeating incumbent Macron in the second round two weeks later.
“Never has the possibility of real change been so close,” Le Pen told jubilant supporters, arguing that it was time for France to restore law and order, curb immigration – and have a woman as president for the first time.
“Our country is ready and I think it would be a sign of democratic maturity,” she said of the need for a female head of state. “Everyone in power has failed. So I ask all the French: ‘Shall we try something different?’.”
Le Pen said so earlier in the day she was open Having leftists in your government if it beats Macron.
Le Pen said she could be “very well loyal to people on the left, for example [former Socialist minister Jean-Pierre] Chevènement, in other words, a sovereign left, a left that supports reindustrialization, the defense of our great industries.”
What is there to see today?
EU Commission President Ursula von der Leyen visits Kyiv
Publication of the fifth EU round of Russia sanctions expected in the Official Journal
Arming finances: In this two-piece Big Read, the FT tells in great detail how the most aggressive financial sanctions yet came together and what that means for them future the US dollar – and partly the euro – as a reserve currency.
French gloom: The French electorate is therefore more disillusioned with the political system overall than Germans, Scandinavians, Poles or Hungarians this poll carried out on behalf of the European Council for Foreign Relations. French respondents think their national political system is more broken than the EU’s, while in Germany the perception is the opposite.
Post-war ETS: Before Putin’s invasion of Ukraine, the EU had planned to expand its emissions trading scheme to include transport and housing. That politics short of the Center for European Reform discusses how a higher and more inclusive carbon price in the EU can be made both effective and politically enforceable.
https://www.ft.com/content/fe2aee92-4a98-4158-9f4e-e5b5a38becbf EU oil embargo against Russia expected “sooner rather than later”.