The European Commission has invited 27 EU countries to tighten sanctions against Russia for the war in Ukraine and decide on a phased oil embargo, as well as to strengthen the isolation of the Russian banking system, expand sanctions lists and ban real estate transactions for Russians who do not have a European residence permit or citizenship.

“All these measures will deprive the Russian economy of opportunities for modernization and diversification. Putin wanted to erase Ukraine from the map of the world. He definitely won’t succeed. Quite the opposite: Ukraine rose in a single impulse, and his country, Russia, is sinking,” said the head European Commission Ursula von der Leyen, presenting the sixth package of sanctions in the European Parliament.

The West has imposed the most massive sanctions in history on Russia, designed to set it back decades and prevent the Kremlin from financing the biggest military aggression in Europe since World War II. The US and other developed countries have already abandoned Russian oil, gas and coal, but they bought little, unlike the EU, which is almost 40% dependent on Russian gas and 30% on oil and oil products.

The European oil embargo is the most radical measure of economic coercion for peace by Vladimir Putin left in reserve by the West. The oil and gas sector brings Russia up to half of budget revenues and more than half of exports, and it sells 70% of gas and 60% of oil and oil products to Europe. During the two and a half months of the war, the EU paid Russia more than 20 billion euros for oil and over 30 billion euros for gas.

“Now we are proposing an oil embargo. A total ban on the import of all Russian oil and oil products, both offshore and pipeline,” von der Leyen said.

As with the refusal to purchase coal from Russia in the fifth package of sanctions, the oil embargo will be introduced gradually. The European Commission has proposed a six-month transition period for oil imports, and wants to abandon Russian oil products by the end of this year.

Among other sanctions from the sixth package, von der Leyen called the disconnection of the largest Russian bank Sberbank from SWIFT, a ban on the broadcasting of three Russian TV channels and the expansion of sanctions lists, including through the Russian military involved in the killings of civilians in Bucha.

“Besides, the Kremlin relies on European auditors, consultants and PR people. We will prohibit Russian companies from providing such services,” she said.

Among the possible targets of the new package of sanctions, the Western press named both Patriarch Kirill and the banks MKB and Rosselkhozbank. In addition, a ban on European tankers from transporting Russian oil was also discussed, which would affect exports from Russia not only to Europe, but also to countries that did not impose sanctions, primarily China and India.

The European Commission also proposed to ban Russians from real estate transactions on its territory, writes Bloomberg with reference to the draft decision. If the ban is approved in this form, the EU will prohibit directly or indirectly the transfer or sale of real estate rights to citizens and residents of Russia, as well as Russian legal entities. An exception will be made for those who have a residence permit or citizenship of the countries of the European Economic Area (EEA) or Switzerland.

Details and specific names in the new sanctions list will become known later, only after the proposals of the European Commission (in fact, the EU governments) are discussed and approved by the ambassadors of all 27 EU countries, and the text is published in the official European journal.

The ambassadors sat down to discuss on Wednesday morning. Since the proposals were agreed in advance, approval could follow today. However, it is possible that the EU will hold the new package until the next escalation of the war, which some observers expect around May 9th.

The oil embargo will be introduced gradually, and Hungary and Slovakia may also receive the right to postpone until the end of 2023.

“Don’t kid yourself: it won’t be easy. Some EU countries are heavily dependent on Russian oil. We’ll have to deal with that,” von der Leyen said.

“We will make sure that the refusal of Russian oil goes smoothly, in order to give both us and our partners time to negotiate with alternative suppliers and minimize the impact on world markets. To put maximum pressure on Russia, but limit the damage to us and our partners as much as possible. Therefore that in order to help Ukraine, we need a strong economy,” she said.

The EU’s main partner, the United States, asked Europe not to rush into an oil embargo, because a sharp jump in oil prices would destabilize the world economy, and the Kremlin would be allowed to earn the same money by selling less oil, which would deprive sanctions of economic sense.

A complete and abrupt break with the decline in production in Russia will lead to a shortage and an increase in oil prices from the current $100-110 to $140-170 per barrel, according to various estimates.

However, in general, developed countries will cope with this scenario, since in the worst case they will have to replace about 5 million barrels of Russian raw materials and oil products per day at the current daily consumption of 45 million barrels, Bruegel analysts calculated.

This is quite possible, because the members of the OECD club of rich countries now have 1.5 billion barrels in strategic reserves. Another 3 billion barrels are in private storage. There is also a chance to increase production: the existing free capacity allows Saudi Arabia to increase production by 1-2 million barrels per day, the UAE and Iraq can add more than 1 million, and if sanctions are lifted from Iran, this is another 1 million barrels.

Another approximately 2.7 million barrels can be replaced by savings in the next four months, the International Energy Agency (IEA) is confident.

Exceptions to European sanctions will remain for the financial industry. In particular, the EU does not even stutter about extending them to Gazprombank. Payments for Russian energy resources pass through it, and in conditions when half of the Central Bank’s foreign exchange reserves are frozen, it has actually replaced it as a center for accumulating currency in Russia.

Sberbank’s disconnection from the SWIFT messaging system has been expected since the US imposed blocking sanctions on it in April. The largest private Alfa-Bank fell under the same, but so far there have been no reports of a possible disconnection from SWIFT.

SWIFT is a European consortium and only EU sanctions, confirmed by the Belgian authorities, will force it to shut down the bank. Since the beginning of the war , 7 banks have been disconnected from SWIFT , of which 4 are state-controlled – VTB, VEB, Otkritie and Promsvyazbank, and three are not – Bank Rossiya, Sovcombank and Novikombank.

The loss of the EU, the largest buyer of oil, threatens Russia with an irreversible decline in oil production due to the forced conservation of old fields, since it is impossible to redirect all European exports to other markets, primarily to Asia, due to the lack of tankers and oil pipelines.

This is very unfortunate for Russia, since it is already suffering massive losses due to the already imposed sanctions, because they cut its ties with the Western economy, which has been the country’s main source of money, technology and trade for all post-Soviet decades.

Russia cannot find another such rich and developed partner as the West, and the turn to the east to the developing countries of Asia will take more than a decade. Therefore, economists are predicting Russia’s economic decline by about 10% this year and years of stagnation after.

However, Russia also has levers of economic influence on the West, and the main one is minerals. In addition to oil – the main export commodity – Russia sells natural gas, coal, uranium, nickel, palladium and other metals to the world market.

But the main lever of pressure on Europe is natural gas.

Russia demonstrated its effectiveness even before the start of the war, cutting gas supplies to the EU, which led to a record jump in prices, generated popular discontent and brought the Old World to the brink of recession.

After the attack on Ukraine, the Kremlin moved to an open gas war. First, he demanded to pay for gas through Gazprombank in euros converted into rubles, and then turned off the tap to Bulgaria and Poland as soon as they rejected the new scheme.

It is more difficult for Europe to give up gas than oil, and dependence on Russian supplies of this fuel is higher than on oil, so the EU is not yet discussing a gas embargo, although it promises to cut purchases from Russia by two-thirds by the end of the year.

Gas is supplied mainly through pipelines, and Europe has only increased its purchases in recent years to replace dirtier coal and partly nuclear power. Several gas pipelines lead from Russia to the EU at once, and only one oil pipeline – Druzhba.

Some countries in central Europe are almost completely dependent on Russian gas. And if Russia turns off gas to the largest industrial power – Germany, then it will have to impose restrictions and turn off factories. The German central bank has estimated the potential damage only to Germany from the gas embargo at 5% of GDP, or 180 billion euros.

As Russia’s reputation as a reliable gas supplier is shattered, the EU is already looking to cut purchases, and the share of gas in Russia’s export earnings before the latest price hike was about 10% compared to about 40% from oil and oil products, Vladimir Putin has a free hand to answer European oil embargo against Russian gas. And if desired, also restrict the export of metals.

Everything is ready for this – the day before the announcement of the sixth package of sanctions, Putin signed a decree on counter-sanctions, which prohibited any transactions, including the supply of raw materials, with those who fall under them. He ordered the list to be compiled within 10 days.