Europe is set to ramp up its oil war against Russia — and markets are bracing for more disruption
The European Union’s ban on Russian oil product exports is slated to kick in on Feb. 5.
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Europe is once again poised to ratchet up the pressure on Russia’s oil revenues, seeking to deplete President Vladimir Putin‘s war chest as the Kremlin’s nearly year-long onslaught in Ukraine drags on.
But some energy analysts are worried that the proposed measures could cause “significant market dislocations.”
The European Union’s ban on Russian oil product exports is slated to kick in on Feb. 5. The embargo will take effect exactly two months after the West took by far the most significant step to curtail fossil fuel export revenue funding Russia’s war.
The Group of Seven implemented a $60 price cap on Russian oil on Dec. 5. That came alongside the EU’s import ban on Russian seaborne crude, as well as the corresponding bans of other G-7 partners.
It is thought that the EU’s forthcoming embargo on Russian petroleum products will be both more complex and more disruptive than what has come before.
As part of the European Union’s sixth package of sanctions against Russia, adopted in June last year, the 27-member bloc imposed a ban on the purchase, import or transfer of seaborne crude oil and petroleum products from Russia.
The restrictions on Russian crude oil took effect on Dec. 5, while the measures targeting Moscow’s refined petroleum products will apply from Feb. 5.
Analysts at political risk consultancy Eurasia Group warned the EU’s imminent ban “will probably have a more disruptive effect than previous EU crude-import sanctions.”
Concerns about further supply disruptions come amid talks regarding further oil price caps. The EU and its G-7 allies are reportedly considering a $100 per barrel price cap on premium Russian oil products like diesel and a $45 cap on discounted products like fuel oil and industrial lubricant oil.
The thresholds, first reported by Bloomberg last week, are also expected to take effect on Feb. 5, although the figures may change during talks between member states and the bloc’s allies.
A spokesperson for the European Commission, the EU’s executive arm, said discussions between member states were ongoing but declined to provide any further details.
“If it is introduced, it would be last minute, potentially creating more confusion in the market,” analysts at Eurasia Group said.
China and India
“We expect some disruption, especially in the immediate aftermath of the ban as EU markets continue to line up alternative supplies,” Matthew Sherwood, an analyst at the Economist Intelligence Unit, told CNBC via email. “We also expect this to put upward pressure on prices for oil products more generally.”
Sherwood said the team at EIU anticipates some rerouting of flows, with Moscow sending more barrels to China, India, the Middle East and Africa, and Europe ramping up imports from India, China, the Middle East and the U.S.
This, he added, would likely increase transport costs.
Russia retaliated against the Western measures implemented in late 2022 by banning oil sales to countries that abide by the price cap.
Presidential Press Office | Sputnik | Reuters
Energy analysts had been skeptical about the impact of the G-7 price cap on Russian oil, particularly as Moscow had been able to reroute much of its European seaborne shipments to the likes of China, India and Turkey.
The EU urged India and China to support a price cap on Russian oil. Nonetheless, India’s oil imports were reported to have jumped to a five-month record in December as the country actively ramped up its purchases of Russian crude, while China was seen as the second largest buyer of Urals in January.
“The impact of sanctions on Russian crude exports after two months of the European Union embargo has not been as devastating as some predicted,” Stephen Brennock, senior analyst at PVM Oil Associates in London, said in a research note.
His comments come shortly after Reuters reported that oil loadings from Russia’s Baltic ports were poised to jump by 50% in January from December. “Not bad for the world’s most sanctioned country,” Brennock said.
“The same fate may however not await its refined oil products,” he added. “China and India have been a lifeline for Russian crude exports given their large refining capacities. Yet this also means that they will continue to take cheap imported crude oil and process it domestically rather than buying refined oil.”
Shipping and pricing issues are key concerns when it comes to the EU’s ban on Russian oil product exports. Indeed, it is when these challenges are factored in that analysts at Eurasia Group believe the product ban could have an even bigger impact on markets than its predecessor crude embargo.
The seaborne transport of Russian oil products is thought to be more difficult because tankers must be deep cleaned when switching from carrying one fuel to another, such as from gasoline to lubricants. It also requires more vessels than the crude sector since fuel tankers are smaller than crude carriers.
“This will create logistical challenges and higher transport costs if Russia seeks to redirect product flows to Asia, as it has done with crude oil,” analysts at Eurasia Group said.
‘A shortfall seems likely’
Russia retaliated against the Western measures implemented in late 2022 by banning oil sales to countries that abide by the price cap.
Kremlin spokesperson Dmitry Peskov previously said a Western price cap on Russian oil would not affect its ability to sustain what it describes as its “special military operation” in Ukraine.
“Once the EU embargo on Russian seaborne fuel exports kicks in, we are likely to see prices for gasoline and especially diesel remain supported by tightening supply – not least if the embargo is being followed up by a $100 per barrel price cap on diesel,” Ole Hansen, head of commodity strategy at Saxo Bank, said in a research note.
Hansen said on Jan. 27 that this proposed level was some $30 below current market levels.
“Russia may, however, struggle to offload its diesel to other buyers, with key customers in Asia being more interested in feeding their refineries with heavily discounted Russian crude, which can then be turned into fuel products selling at the prevailing global market price,” he added.
Hansen said the supply of diesel to Europe from the U.S. and the Middle East could make up some of the missing barrels from Russia, “but a shortfall seems likely.”
Wind energy powered 20% of all electricity consumed in Europe (19% in the EU) in 2024, and the EU has set a goal to grow this share to 34% by 2030 and more than 50% by 2050.
To stay on track, the EU needs to install 30 GW of new wind farms annually, but it only managed 13 GW in 2024 – 11.4 GW onshore and 1.4 GW offshore. This is what’s holding the EU back from achieving its wind growth goals.
Three big problems holding Europe’s wind power back
Europe’s wind power growth is stalling for three key reasons:
Permitting delays. Many governments haven’t implemented the EU’s new permitting rules, making it harder for projects to move forward.
Grid connection bottlenecks. Over 500 GW(!) of potential wind capacity is stuck in grid connection queues.
Slow electrification. Europe’s economy isn’t electrifying fast enough to drive demand for more renewable energy.
Brussels-based trade association WindEurope CEO Giles Dickson summed it up: “The EU must urgently tackle all three problems. More wind means cheaper power, which means increased competitiveness.”
Permitting: Germany sets the standard
Permitting remains a massive roadblock, despite new EU rules aimed at streamlining the process. In fact, the situation worsened in 2024 in many countries. The bright spot? Germany. By embracing the EU’s permitting rules — with measures like binding deadlines and treating wind energy as a public interest priority — Germany approved a record 15 GW of new onshore wind in 2024. That’s seven times more than five years ago.
If other governments follow Germany’s lead, Europe could unlock the full potential of wind energy and bolster energy security.
Grid connections: a growing crisis
Access to the electricity grid is now the biggest obstacle to deploying wind energy. And it’s not just about long queues — Europe’s grid infrastructure isn’t expanding fast enough to keep up with demand. A glaring example is Germany’s 900-megawatt (MW) Borkum Riffgrund 3 offshore wind farm. The turbines are ready to go, but the grid connection won’t be in place until 2026.
This issue isn’t isolated. Governments need to accelerate grid expansion if they’re serious about meeting renewable energy targets.
Electrification: falling behind
Wind energy’s growth is also tied to how quickly Europe electrifies its economy. Right now, electricity accounts for just 23% of the EU’s total energy consumption. That needs to jump to 61% by 2050 to align with climate goals. However, electrification efforts in key sectors like transportation, heating, and industry are moving too slowly.
European Commission president Ursula von der Leyen has tasked Energy Commissioner Dan Jørgensen with crafting an Electrification Action Plan. That can’t come soon enough.
More wind farms awarded, but challenges persist
On a positive note, governments across Europe awarded a record 37 GW of new wind capacity (29 GW in the EU) in 2024. But without faster permitting, better grid connections, and increased electrification, these awards won’t translate into the clean energy-producing wind farms Europe desperately needs.
Investments and corporate interest
Investments in wind energy totaled €31 billion in 2024, financing 19 GW of new capacity. While onshore wind investments remained strong at €24 billion, offshore wind funding saw a dip. Final investment decisions for offshore projects remain challenging due to slow permitting and grid delays.
Corporate consumers continue to show strong interest in wind energy. Half of all electricity contracted under Power Purchase Agreements (PPAs) in 2024 was wind. Dedicated wind PPAs were 4 GW out of a total of 12 GW of renewable PPAs.
Read more: Renewables could meet almost half of global electricity demand by 2030 – IEA
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In the Electrek Podcast, we discuss the most popular news in the world of sustainable transport and energy. In this week’s episode, we discuss the official unveiling of the new Tesla Model Y, Mazda 6e, Aptera solar car production-intent, and more.
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The Chinese EV leader is launching a new flagship electric sedan. BYD’s new Han L EV leaked in China on Friday, revealing a potential Tesla Model S Plaid challenger.
What we know about the BYD Han L EV so far
We knew it was coming soon after BYD teased the Han L on social media a few days ago. Now, we are learning more about what to expect.
BYD’s new electric sedan appeared in China’s latest Ministry of Industry and Information Tech (MIIT) filing, a catalog of new vehicles that will soon be sold.
The filing revealed four versions, including two EV and two PHEV models. The Han L EV will be available in single- and dual-motor configurations. With a peak power of 580 kW (777 hp), the single-motor model packs more power than expected.
BYD’s dual-motor Han L gains an additional 230 kW (308 hp) front-mounted motor. As CnEVPost pointed out, the vehicle’s back has a “2.7S” badge, which suggests a 0 to 100 km/h (0 to 62 mph) sprint time of just 2.7 seconds.
To put that into perspective, the Tesla Model S Plaid can accelerate from 0 to 100 km in 2.1 seconds. In China, the Model S Plaid starts at RBM 814,900, or over $110,000. Speaking of Tesla, the EV leader just unveiled its highly anticipated Model Y “Juniper” refresh in China on Thursday. It starts at RMB 263,500 ($36,000).
BYD already sells the Han EV in China, starting at around RMB 200,000. However, the single front motor, with a peak power of 180 kW, is much less potent than the “L” model. The Han EV can accelerate from 0 to 100 km/h in 7.9 seconds.
At 5,050 mm long, 1,960 mm wide, and 1,505 mm tall with a wheelbase of 2,970 mm, BYD’s new Han L is roughly the size of the Model Y (4,970 mm long, 1,964 mm wide, 1,445 mm tall, wheelbase of 2,960 mm).
Other than that it will use a lithium iron phosphate (LFP) pack from BYD’s FinDreams unit, no other battery specs were revealed. Check back soon for the full rundown.
Source: CnEVPost, China MIIT
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