Europe faces pressure to join boycott of Russian oil and gas

Brussels: Europe faces a tough choice: Is it worth a recession to choke off oil and gas money to Russia while it fights a war in Ukraine?

The 27-member European Union faces far more economic pain from the war and resulting sanctions than the U.S. true above all when it comes to the oil and gas that powers vehicles and keeps the heat and lights on.

While the U.S. and British bans on Russian oil increase the pressure on Europe to follow suit, the continent's dependence on Russia for energy makes an immediate embargo much more difficult. Still, some officials say it is the only way to stop pouring billions in oil and gas revenue into President Vladimir Putin's coffers, despite the near certainty of record inflation worsening.

Europe gets around 40 per cent of its natural gas and 25 per cent of its oil from Russia, whereas the U.S. gets meager amounts of oil and no natural gas.

An EU boycott would mean higher prices at the pump and on utility bills, and ultimately the threat of an energy crisis and recession while the economy is still recovering from the coronavirus pandemic.

Prices for everything from food to electricity are already painfully high partly because of skyrocketing natural gas prices in Europe. Governments have rolled out subsidies to compensate people for high utility bills, while gasoline has risen above 2.01 euros per liter the equivalent of 8.33 per gallon, meaning filling up a compact car could cost 90 euros ( 98).

Those costs already are cutting into consumer spending, with inflation at all-time high of 5.8 per cent. The question is: How much more pain can Europeans take to try to stop Putin's attack on Ukraine?

The consequences to the European economy would be major, said Simone Tagliapietra, an energy policy expert at the Bruegel think tank in Brussels. And therefore, there would need to be an upfront, clear, political decision that we are willing to compromise our economy, we are willing to afford a recession, in order to hit Putin where it hurts. US President Joe Biden acknowledged as much when he announced the U.S. ban on Russian oil imports, saying many of our European allies and partners will not be able to join us.

Efforts to agree on a boycott could be complicated because some EU member countries are much more dependent than others on Russia. Germany and Italy rely heavily on Russian natural gas. Poland gets 67 per cent of its oil from Russia, while Ireland gets only 5 per cent.

It will be divisive within Europe because one part of Europe risks suffering more, said David Elmes, head of the Global Energy Research Group at the University of Warwick's business school. So it's going to put the European political system and the European agreements and the European project ... under an awful lot of stress.

The European Commission, the EU's executive arm, announced a plan Tuesday to wean the bloc off two-thirds of Russian natural gas by the end of the year, including by purchasing more liquefied natural gas brought by ship and building up renewables more quickly.

That already will be a massive challenge to accomplish, Netherlands Prime Minister Mark Rutte said, because we are very much dependent, that's the sad reality.