https://www.wsj.com/articles/eus-ban-on-russian-oil-adds-str…
**EU’s Ban on Russian Oil Adds Stress to Region’s Economies**
**Crude prices traded at their highest levels in more than two months after EU leaders committed to an embargo on most Russian oil; sanctions said to include a ban on insuring ships carrying Russian oil**
**By Laurence Norman , Joe Wallace and Georgi Kantchev, The Wall Street Journal, May 31, 2022 12:31 pm ET**
**...**
**The European Union is set to impose its toughest sanctions yet on Russia, banning imports of its oil and blocking insurers from covering its cargoes of crude, officials and diplomats say, as the West seeks to deprive Moscow of cash it needs to fund the war on Ukraine and keep its economy functioning.**
**The ban on insurers will cover tankers carrying Russian oil anywhere in the world. These sanctions could undercut Russia’s efforts to sell its oil in Asia. European companies insure most of the world’s oil trade.... The insurance ban – due to be implemented in six months to mollify concerns of shipping nations including Greece and Cyprus – is the most punishing of the two measures, traders and shipowners say. Few companies are willing to transport oil on uninsured tankers...**
**The insurance ban, by making it harder for Russia to sell oil to Asia, makes it more likely that oil prices will stay high or go higher. ...** [end quote]
The insurance ban will lead to higher worldwide inflation. It will make today’s situation more similar to 1973-74 which led to stagflation. Europe, which has a lot of diesel-powered cars, will source diesel from the U.S., driving up trucking costs here. Poor countries will suffer most as they compete with wealthier countries, including China as it re-opens from its Covid shutdown.
The European ban on Russian oil will force true trend changes if it lasts more than a year. The Europeans will be forced to put alternative energy sources online (some carbon-based, some not). The Russians may suffer permanent production capacity losses since much of its oil infrastructure isn’t geared to quick and deep production cuts. The frigid Siberian climate means pipelines can burst without oil in them, and low-yielding Soviet-era fields are expensive to maintain and restart.
Wendy