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US bans Russian oil, gas and coal imports, Know Impact on India

US bans Russian oil, gas and coal imports, Know Impact on India

US bans Russian oil: US President Joe Biden announced on March 8, 2022 a complete ban on the importation of all Russian oil, natural gas and coal into the United States, In an effort to impose harsh sanctions amid Putin’s war in Ukraine.

In his address, Biden said that America is targeting the main artery of Russia’s economy. “We are banning all imports of Russian oil and gas and energy. This means that Russian oil will no longer be acceptable at American ports and the American people will deal another powerful blow to Putin’s war machine.”

The United States has unilaterally banned oil and energy imports from Russia. European nations still have to follow suit, some of them pledging to be independent of Russian natural gas, including Denmark.

There was reportedly some disagreement among European countries about imposing sanctions on Russian energy imports. It is important to note that European countries are significantly more dependent on Russian energy than the US.

US oil imports from Russia

United States oil imports from Russia accounted for a small portion of America’s energy resource, which stood at about 8 percent in 2021, of which crude oil imports accounted for only 3 percent.

According to the US Department of Energy, Russian oil imports to the US fell to zero in the last two weeks of February as US companies themselves began to sever ties with Russia amid the invasion of Ukraine.

Shell withdraws from Russia

Multinational oil and gas giant Shell on March 8, 2022 announced the withdrawal of its participation in all Russian gas and oil products, including an immediate moratorium on crude oil purchases from the country.

“As an immediate first step, we will halt all spot purchases of crude oil, close service stations, aviation fuel and lubricants operations in Russia,” the UK-based company said in a statement.

The nation and other Western governments are seriously considering sanctions on Russian energy exports in response to the ongoing war in Ukraine, UK PM Boris Johnson said in a joint press conference with Canadian PM Justin Trudeau and Dutch PM Mark Root. Huh.

Will Europe impose sanctions on Russian energy?

European nations, which get about 40 percent of their gas imports and a quarter of their oil imports from Russia, rely heavily on stopping it overnight. Instead the nations have opted to set a target of cutting their Russian gas imports by two-thirds.

Britain’s Prime Minister Boris Johnson, along with two other leaders, insisted during his press briefing that they all had to consider how they could get away from, over-reliance on Russian hydrocarbons.

German Chancellor Olaf Scholz said that although Germany supports tough measures against Russia, Russian energy supplies are essential for daily life in Europe. Europe’s energy supply for heating, mobility, electricity and industry cannot be secured otherwise for the time being, he said in a statement.

Russia is Germany’s largest supplier of natural gas, which currently imports about 38 percent according to government figures. Gas accounts for about a fifth of German electricity generation.

Impact on oil prices

Crude oil prices jumped on March 8 after the US imposed sanctions on Russian energy imports. Nickel prices also hit record highs. The main international oil contract, Brent, rose 4.7 percent to $128.06 a barrel, while the main US contract, WTI, rose 4.1 percent to $124.36 a barrel. It is still below the 14-year peak of $139.13 a barrel seen on March 6, the highest since July 2008.

Russia has warned that the price of crude oil could rise to $ 300 a barrel

Russian Deputy Prime Minister Alexander Novak warned that sanctions on Russian oil and energy products by Western countries would have disastrous consequences for the global economy and would push the price of crude to over $300 a barrel, if not more.

Novak said it is impossible to quickly change the amount of Russian oil in the European market, adding that “it will take more than a year, and it will be much more expensive for European consumers.”

How will this affect the Indian economy?

India is heavily dependent on oil and energy imports to meet its domestic energy needs. About 86 percent of the country’s crude oil requirement is met through imports. The global jump in oil and energy prices is bound to impact the Indian market and increase its import bills.

A rise in global crude oil prices could add to inflationary pressures and lead to inflation and could have a severe impact on domestic economic growth. Headline CPI inflation rose to 6.01 per cent in January 2022, from 5.66 per cent in December 2021. Retail inflation crossed the upper limit of RBI’s tolerance band for the first time in 7 months. The situation is expected to worsen with the US embargo on Russian energy imports.

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