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In response to the ongoing conflict in Ukraine, the European Union has imposed a ban on the import of Russian diesel fuel and other petroleum products. The move comes as part of a larger effort to limit Moscow's influence, reduce dependence on Russia, and punish the Kremlin for its involvement in the war.
The ban was introduced in conjunction with restrictions on the price of oil products, as part of an agreement among seven democratic states
. The caps, which will limit the price of diesel, are aimed at avoiding a sudden increase in the price of this critical fuel.Diesel is used in a variety of applications, including cars, trucks, agricultural machinery, and factory equipment. The goal is to keep diesel flowing to countries like China and India, while at the same time reducing the profits Moscow can earn from diesel sales.
The Economic Impact of the Ban
Diesel prices have risen due to increased transportation costs and a recovery in demand in China, which is emerging from restrictions imposed by the coronavirus. The importance of diesel to the economy cannot be overstated, as it is the fuel that drives the economy by powering cars, trucks, and machinery.
According to market analysts, last year, Europe imported approximately 700,000 barrels of Russian diesel per day, or around half of its total diesel imports. To replace Russian fuel, members of the European Union will now purchase diesel from the United States, the Middle East, and India.
Matteo Ilardo, a London-based geopolitical analyst with RANE, a risk intelligence firm, notes that the ban will have a significant impact on Europe, especially France, which relies heavily on Russian diesel. "Being able to phase out completely 20% of total seaborne diesel exports from Russia will be a challenge," Ilardo says.
Hedi Grati, the head of refining and marketing at S&P Global Commodity Insights, an energy research and data company in London, notes that Europe does have some refineries, but not enough to meet the demand for diesel.
He states that, "The diesel will simply have to come from somewhere else. The most logical suppliers are countries in the Middle East like Saudi Arabia, Kuwait, and places like that, and then also India and the United States." U.S.
Treasury Secretary Janet Yellen says that the caps set by the European Union will play a critical role in the global coalition's efforts to degrade Russia's ability to prosecute its illegal war. Yellen stated, "Combined with our historic sanctions, we are forcing Putin to choose between funding his brutal war or propping up his struggling economy." Europe's ban on Russian diesel imports is a decisive step towards reducing dependence on Moscow and punishing the Kremlin for its involvement in the war in Ukraine.