Business leaders and consumers in Austria are preparing for the next round of economic sanctions after EU Commission President Ursula von der Leyen confirmed on Wednesday that the proposal includes an embargo on Russian oil.
The draft proposal is now with the 27 EU member states for consideration and a unanimous decision is required for the sanctions to be enforced.
According to Der Standard, consultations with member states are expected to last several days, but Hungary and Slovakia have already voiced concerns due to their high dependency on Russian oil.
In Austria, Energy Minister Leonore Gewessler has already declared support of an EU embargo on Russian oil and confirmed that Austria stopped processing Russian oil in March.
But a ban on Russian oil is a different story and would likely lead to even higher prices in Austria at a time when inflation is at 7.2 percent.
Here’s what you need to know about the proposed embargo on Russian oil.
What is in the next round of EU sanctions against Russia?
The proposal includes sanctions against the head of the Russian Orthodox Church, Patriarch Kirill I, and the exclusion of Sberbank from the Swift payment system, but it is the planned embargo on Russian gas that would have the most impact.
According to reports, imports of crude oil to the EU will be phased out within six months, followed by imports of refined oil products by the end of 2022.
During an announcement at the European Parliament, Von der Leyen said: “In this way we maximize the pressure on Russia and at the same time minimize collateral damage for us and our partners worldwide.
“Because if we want to help Ukraine, our own economy must remain strong.”
The Center for Research on Energy and Clean Air (CREA) recently announced that EU countries have transferred €48 billion to Russia since the start of the war in exchange for energy supplies.
How will the new sanctions on Russian oil impact Austria?
Michael Landesmann, Senior Researcher at the Vienna Institute for International Economic Studies (WIIW), told The Local that the biggest impact in Austria would be on consumer prices due to disruption to the global supply of oil.
Landesmann said: “The EU will become an additional player in markets where the EU was not previously present and this will push prices up.
“But on the supply side, there will be more Russian oil on the world market than there was before, and when there is too much supply it depresses world markets.”
As a result, Landesmann expects there to be an increase in the price of oil and associated products and services within Austria in the short term.
He said: “Oil prices are already high right now and they could rise another 10 to 15 percent, but as things become more transparent the prices will come down again.
“Populations in western Europe – including Austria – will feel these price hikes, along with businesses involved in the processing of crude oil into different products.
“Fuel also feeds into transport costs so there will be an additional element of price transmission across the economy.”
Alternative oil markets for Austria include countries in the Middle East, Venezuela and Nigeria.
What about gas?
While there is a wider global market for sourcing oil and coal outside of Russia, the same situation doesn’t apply to natural gas and there are widespread concerns in Austria that an embargo on Russian gas could be next.
In an interview in Der Standard, Wolfgang Katzian, President of the Austrian Trade Union Federation, said: “The big problem is industry – we have sectors that cannot produce without gas.
“At the end of the day, mass unemployment would be the result of a gas boycott, which I don’t want. I am therefore clearly against a gas embargo.
“The third area that is often forgotten is that we also need gas to generate electricity, which means a gas crisis would be followed by an electricity crisis.”
So far, the EU Commission has steered clear of imposing sanctions on Russian gas and Landesmann is not expecting an embargo on gas imports anytime soon.
Landesmann told The Local: “From a European point of view, it’s good to push for an embargo on oil because it’s of bigger importance to Russia as a source of income.
“In this case, the effects are in favour of the EU, but with gas it would probably be the opposite.”
In Austria, 80 percent of natural gas imports come from Russia. Experts believe Austria could only get rid of this dependency by 2027 if it manages to reduce its gas consumption by 25 per cent and expand biogas and green hydrogen domestic production.
In April, Austria announced a €5 billion investment towards storage and natural gas stockpiling as a contingency plan for next winter. This is in addition to €1.6 billion that had already been earmarked for Austria’s reserve gas supply.
Still, the country’s gas storage tanks, which should be 80 per cent full by the start of next autumn to last through winter, are currently only around 18 per cent full.
What has already been sanctioned by the EU?
Previous EU sanctions have targeted Russian steel, cement and coal, denied Russian planes and ships access to EU airspace and ports, and banned the export of technically important goods to Russia. Russia’s financial system has also been sanctioned.
However, other countries (that are not as heavily reliant on Russian energy supplies) have already placed sanctions on Russian oil.