US banning Russian oil imports as Biden warns of ‘costs’

WASHINGTON (AP) — President Joe Biden announced Tuesday the U.S. will ban all Russian oil imports, toughening the toll on Russia’s economy in retaliation for its invasion of Ukraine, but he acknowledged it will bring costs to Americans, particularly at the gas pump.

The action follows pleas by Ukrainian President Volodymyr Zelenskyy to U.S. and Western officials to cut off the imports, which had been a glaring omission in the massive sanctions put in place on Russia over the invasion. Energy exports have kept a steady stream of cash flowing to Russia despite otherwise severe restrictions on its financial sector.

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“We will not be part of subsidizing Putin’s war,” Biden declared, calling the new action a “powerful blow” against Russia’s ability to fund the ongoing offensive.

He warned that Americans will see rising prices, saying, “Defending freedom is going to cost.”

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Biden said the U.S. was acting in close consultation with European allies, who are more dependent on Russian energy supplies. The European Union this week will commit to phasing out its reliance on Russia for energy needs as soon as possible, but filling the void without crippling EU economies will likely take some time.

Unlike the US, which is a major oil and gas producer, Europe relies on imports for 90% of its gas and 97% of its oil products. Russia supplies 40% of Europe’s gas and a quarter of its oil. The U.S. does not import Russian natural gas.

The issue of oil sanctions has created a conflict for the president between political interests at home and efforts to impose costs on Russia. Though Russian oil makes up only a small part of U.S. imports, Biden has said he was reluctant to ban it, cutting into supplies here and pushing gasoline prices higher.

Inflation is at a 40-year peak, fueled in large part by gas prices, and that could hurt Biden heading into the November midterm elections. He said two weeks ago that he wanted “to limit the pain the American people are feeling at the gas pump.”

Gas prices have been rising for weeks due to the conflict and in anticipation of potential sanctions on the Russian energy sector. The average price for a gallon of gasoline in the U.S. hit a record $4.17 Tuesday, rising by 10 cents in one day, and up 55 cents since last week, according to auto club AAA.

Biden said it was understandable that prices were rising, but cautioned the U.S. energy industry against “excessive price increases” and exploiting consumers.

Even before the U.S. ban many Western energy companies including ExxonMobil and BP moved to cut ties with the Russia and limit imports. Shell, which purchased a shipment of Russian oil this weekend, apologized for the move on Tuesday amid international criticism and pledged to halt further purchases of Russian energy supplies. Preliminary data from the U.S. Energy Department shows imports of Russian crude dropped to zero in the last week in February.

In 2021, the U.S. imported roughly 245 million barrels of crude oil and petroleum products from Russia — a one-year increase of 24%, according to the U.S. Energy Information Administration.

“It’s an important step to show Russia that energy is on the table,” said Max Bergmann, a former State Department official who is now a senior fellow at the Democratic-leaning Center for American Progress.

Bergmann said it wasn’t surprising that the U.S. was able to take this step before European nations, which are more dependent on Russian energy.

“All of this is being done in coordination, even if the steps are not symmetrical,” he said. “We are talking to them constantly.”

The news of Biden’s decision Tuesday was first reported by Bloomberg.

The White House announcement comes amid bipartisan pressure on Capitol Hill to ban Russian energy and impose other economic costs.

Last week, House Speaker Nancy Pelosi gave a big boost when she declared, “Ban it.”

On Monday, Democrats on the powerful Ways & Means Committee posted, then removed, an announcement on a bipartisan bill to ban Russian oil imports and slap further trade sanctions on the country, according to an aide, because of pushback from the White House to acting before Biden had made his decision.

Pelosi told Democrats in a meeting early Tuesday that the House would go forward with a vote on legislation to ban the Russian oil imports, according to a person granted anonymity to discuss the private caucus meeting.

“The United States economy can fully handle any of the challenges associated with higher oil prices,” Jason Furman, a Harvard professor and former top economic adviser to President Barack Obama. “But it will bring some challenges. We’re going to have higher prices at the pump, and there’s no way around that.”

Before the invasion, Russian oil and gas made up more than a third of government revenues. Global energy prices have surged after the invasion and have continued to rise despite coordinated releases of strategic reserves, making Russian exports even more lucrative.

As a consequence of Russia’s invasion of Ukraine, the U.S. and international partners have sanctioned Russia’s largest banks, its central bank and finance ministry, and moved to block certain financial institutions from the SWIFT messaging system for international payments.

But the rules issued by the Treasury Department allow Russian energy transactions to keep going through non-sanctioned banks that are not based in the U.S. in an effort to minimize any disruptions to the global energy markets.

German Chancellor Olaf Scholz has said he opposes a European ban on Russian energy imports and that there’s no other way to meet the European Union’s needs for motor fuel, heat and electricity, and industrial use. Vice Chancellor Robert Habeck said Tuesday that when he visited Washington last week, U.S. officials acknowledged Europe was in a different situation.

“They told me in the talks that they will neither demand nor ask that Germany do the same. But I would extrapolate from that for us, and for me, that we need as soon as possible to create the possibility to take similar measures.”

While Russian oil makes up a small amount of overall U.S. energy imports, the U.S. could replace Russian crude with imports from other oil-rich nations, but that could prove politically problematic.

Key U.S. senators are warning the Biden administration from seeking any oil import deal from the Nicolas Maduro regime in Venezuela.

“The Biden administration’s efforts to unify the entire world against a murderous tyrant in Moscow should not be undercut by propping up a dictator under investigation for crimes against humanity in Caracas,” said Sen. Bob Menendez, D-N.J., the chairman of the Foreign Relations Committee, in a statement late Monday. “The democratic aspirations of the Venezuelan people, much like the resolve and courage of the people of Ukraine, are worth much more than a few thousand barrels of oil.”

 

President Joe Biden has decided to ban Russian oil imports, toughening the toll on Russia’s economy in retaliation for its invasion of Ukraine, according to a person familiar with the matter.

The move follows pleas by Ukrainian President Volodmyr Zelenskyy to U.S. and Western officials to cut off the imports, which had been a glaring omission the massive sanctions put in place on Russia over the invasion. Energy exports have kept a steady influx of cash flowing to Russia despite otherwise severe restrictions on its financial sector.

Biden was set to announce the move as soon as Tuesday, the person said, speaking on the condition of anonymity to discuss the matter before an announcement. The White House said Biden would speak Tuesday morning to announce “actions to continue to hold Russia accountable for its unprovoked and unjustified war on Ukraine.”

The U.S. will be acting alone, but in close consultation with European allies, who are more dependent on Russian energy supplies. Natural gas from Russia accounts for one-third of Europe’s consumption of the fossil fuel. The U.S. does not import Russian natural gas.

Biden had explained his reluctance to impose energy sanctions at the outset of the conflict two weeks ago saying that he was trying “to limit the pain the American people are feeling at the gas pump.”

The news of his decision Tuesday was first reported by Bloomberg.

Before the invasion, Russian oil and gas made up more than a third of government revenues. Global energy prices have surged after the invasion and have continued to rise despite coordinated releases of strategic reserves, making Russian exports even more lucrative.

The U.S. and international partners have sanctioned Russia’s largest banks, its central bank and finance ministry, and moved to block certain financial institutions from the SWIFT messaging system for international payments.

But the rules issued by the Treasury Department allow Russian energy transactions to keep going through non-sanctioned banks that are not based in the U.S. in an effort to minimize any disruptions to the global energy markets.

Inflation, at a 40-year peak and fueled in large part by gas prices, has hurt Biden politically with voters heading into the November elections.

The sanctions created a possible trade-off for the president between his political interests at home and abroad. By invading Ukraine, Russia has potentially fed into the supply chain problems and inflation that have been a crucial weakness for Biden, who now is trying to strike a balance between penalizing Putin and sparing American voters.

Biden specifically highlighted the Russian energy carve-outs as a virtue because they would help to protect U.S. families and businesses from higher prices.

“Our sanctions package we specifically designed to allow energy payments to continue,” he said.

Restricting the world’s largest exporter of natural gas and second-largest exporter of oil, after Saudi Arabia, could hurt the unity that U.S. officials say is key to confronting Putin.