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Biden’s ban on Russian oil imports is a symbolic gesture that won’t cost either side very much

March 9, 2022, 9:14 AM UTC

On Tuesday, U.S. President Joe Biden signed an executive order to immediately cut off imports of Russian energy, banning the purchase of crude, gas, and coal, as Russia President Vladimir Putin continues his war against Ukraine.

It’s a dramatic gesture, but the fallout from the executive order will be limited by the small value of U.S.-Russia energy trade. Biden’s order will cut out 10% of the U.S.’s current energy mix, including roughly 3% of U.S. oil supply, which analysts expect the U.S. can easily replace with purchases made elsewhere—although that might require easing sanctions on other exporters, like Venezuela and Iran.

And from Russia’s perspective, the loss of the American market is hardly catastrophic. Russia is the world’s largest oil exporter, shipping 7 million barrels of petroleum and crude per day. The U.S. purchases just 3% of that.

“Biden’s decision to ban U.S. imports of Russian oil is noteworthy, but movement toward a European ban on imports of Russian oil and gas would be the real showstopper, given Europe’s relatively high dependence on energy supplies from Russia,” Jason McMann, head of geopolitical risk analysis at Morning Consult, told Bloomberg.

Europe is a much bigger customer, absorbing close to 60% of Russian oil exports. But the EU—which relies on Russia for roughly 40% of its collective gas imports and 25% of its oil needs—is considering a plan to slash its dependence on Russian oil and gas by two-thirds this year, too.

Losing both the EU and the U.S. will cleave a sizable chunk out of Russian energy sales that exporters will have a hard time replacing, even though Russia still has some substantial customers left.

According to the Washington Post, a cohort of economies—mostly in Central and Eastern Europe—accounting for 32% of Russian oil exports, have yet to back sanctions on Russia. China—Russia’s single largest customer for oil, soaking up 1.6 million barrels of Russian crude per day—leads the pack.

China could easily increase its orders of Russian oil and might well benefit from doing so. With fewer customers, Russian crude is trading at a discount to international rates. Once the EU starts substituting its Russian suppliers with imports from other countries, the international cost of oil will spike, too.

India—another sanction holdout—might take on more Russian crude as well. The subcontinent imports 85% of its oil needs but only receives 3% of that mix from Russia. Faced with the prospect of Brent crude hitting $200 a barrel, New Delhi could restructure its oil imports to favor Russia.

Eamon Barrett
eamon.barrett@fortune.com
@eamonbarrett49

CARBON COPY

Insulating prices

The U.S. Energy Information Administration has forecast that heating oil expenditures will be 43% higher this winter compared with last year, as oil prices surge and weather grows generally more extreme. Soaring energy costs might prompt homeowners (and governments) to embrace one of the most effective and most overlooked means of cutting energy bills: insulating homes. Bloomberg

Plastic crackdown

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From forest to field

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Sustainable palms

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CLOSING NUMBER

0.1% 

In 2017, the City of Westminster—an administrative region in the heart of the British capital—quadrupled the cost of fines issued to motorists for leaving their engine running while idling on the street. Since then, more than 70,000 motorists have been reported for idling, but only 0.1% of those have actually paid the $100 fine. Pollution from traffic kills roughly 4,000 people a year in London, and Westminster—home to the Houses of Parliament—says it has the worst pollution in the country.

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