President Joe Biden is under pressure to punish Russia’s Vladimir Putin by banning Russian oil imports after the current slate of penalties failed to stop the invasion in Ukraine.
U.S. and European sanctions on Moscow have crippled its financial system. But Biden carved out an exemption on Russia’s oil and gas sector, which accounts for 36% of the country’s revenue, wary that a spike in gas prices could add to already record-high inflation.
“The goal was to maximize the impact on Putin and Russia and to minimize the harm on us and our allies and friends around the world,” Biden said this week. About 8% of U.S. liquid fuel imports are from Russia.
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The sanctions are having an impact on the world’s largest oil exporter, with prices Friday surging the most since 2005. Bipartisan majorities say the United States should stop buying Russian oil, with lawmakers turning the pressure on the White House this week and urging ramped-up sanctions.
“I’m all for that. Ban it,” House Speaker Nancy Pelosi said Thursday.
Her remarks followed a hearing in which Biden’s aides were pounded over the president’s plans to ratchet up Putin’s pain by adding new or secondary penalties.
“President Biden must stop American dollars from funding Putin’s war machine by cutting off U.S. imports of Russian oil,” Texas Rep. Michael McCaul, the top Republican on the House Foreign Affairs Committee, told Deputy Secretary of State Wendy Sherman and other officials.
“Energy exports are the lifeblood of the Russian economy. And we should not be allowing Putin to use that lifeblood to spill blood in Ukraine.”
Senators have fast-tracked legislation to halt the import of Russian crude oil, petroleum products, liquefied natural gas, and coal into the U.S., a bill that Sen. Mark Warner, a Virginia Democrat, promised “would strike at the heart of the Russian economy.”
But with prices already high, analysts suggested that a U.S. ban would be largely symbolic.
Banning U.S. imports alone “should not really increase prices,” said Robert McNally, president of Rapidan Energy Group, a market research firm and a former energy adviser in George W. Bush’s White House.
There’s a risk that traders see a slippery slope of escalating penalties, however.
“That could itself cause the price to go higher,” McNally said.
“Overall, the White House priority is not to touch Russia’s oil and gas exports,” he continued. “But they’ve lost control on the Hill, so they have to face reality.”
McNally added, “Will Congress be satisfied with just an import ban? We don’t know. Probably not.”
Sen. Elizabeth Warren, a Massachusetts Democrat, stepped out further.
“It should all be on the table, including banning the import of Russian oil, not just here in the United States but among all of the nations,” she told Fox News.
Once wary, the administration began to signal a shift by the end of the week, with the chairwoman of Biden’s Council of Economic Advisers telling reporters that the U.S. was open to a range of possibilities.
“We don’t import a lot of Russian oil, but we are looking at a range of options that we can take right now if we were to cut the U.S. consumption of Russian energy,” Cecilia Rouse said. “What’s really most important is that we maintain a steady supply of global energy.”
Like Warren, the former head of Ukraine’s state energy company Naftogaz has called upon the U.S. to escalate its response to Russian energy, arguing that doing so is the next step to driving the cost of war home to Putin.
Greg Priddy, a geopolitical risk consultant and former chief energy analyst at Eurasia Group, said the market was already under pressure despite Biden’s exemptions, with risk-averse buyers ignoring the carveouts.
“There are very few willing buyers, anywhere in the world, for Russian oil right now,” he said.
Russian traders are offering discounts of above $20 a barrel, “and they’re not getting takers,” he added. “They’re trying to shove those barrels out at fire sale prices, and nobody will buy them.”
Oil from other countries is also sitting prone, one unintended consequence of the broader penalties as traders attempt to sidestep the perceived risk of trading with Russia.
“Over a million barrels of oil a day from Kazakhstan is getting caught up in the sanctions because it comes out at Russian ports,” said Brenda Shaffer, a senior adviser for energy at the Foundation for Defense of Democracies.
But a broader embargo, as Warren proposed, could have significant ramifications.
“A refusal by any country to import Russian crude, however, would have a dramatic impact on crude prices, pushing crude prices up to the $150 level,” said David Goldwyn, an energy consultant and State Department special envoy and coordinator for international energy affairs from 2009 to 2011.
Analysts said that if sanctions ramp up across all Russian energy exports, the world risks a global economic contraction.
“If we pull Russian [commodity] exports off the markets, this is likely to trigger a global recession,” said Shaffer.
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Europe is heavily reliant on Russian energy and unlikely to join a U.S. ban. Prices have continued to rise despite this, however, with Putin’s invasion pressing leaders to accelerate a transition away from Moscow.
“We need to get independent from Russian gas, oil, and coal,” European Commission President Ursula von der Leyen said Thursday. “Our resolve to go forward in this case is stronger than ever.”
