Russia Is Feeling the Pain of Europe’s Oil Embargo

A near-total ban on imports of Russian crude into the European Union is finally hitting Russia’s oil revenue. Concerns that it would provide the Kremlin with a windfall to fund its war in Ukraine have been confounded — for now.

The US Administration feared that EU sanctions on Russia’s seaborne crude, which came into effect on Monday, would send prices soaring. The particular worry was a ban on the provision of ships and services like insurance and financing for Russian cargoes moving anywhere in the world.

To mitigate the impact, the US proposed a price cap on Russian exports. Cargoes purchased at a price below the cap, eventually set at $60 a barrel, would be exempt from the shipping and services ban.

But it looks like they needn’t have worried — at least not yet.

The last Russian barrels have been shipped to ports in Europe. Moscow has lost a market on its doorstep for more than 1.5 million barrels a day. It looks set to lose sales of another 500,000 barrels a day by the end of the year, if Poland and Germany follow through on pledges to halt pipeline imports.

Yet, far from soaring, oil prices have slumped. By Friday, day five of the import ban, benchmark Brent crude was trading below $77 a barrel, and briefly dipped below $76. That’s down by more than 14% from the highs reached on Monday, after the sanctions came into effect.