- On 30 and 31 May European leaders agreed to ban most Russian oil imports, those arriving by sea.
- It was part of a sixth sanctions package; that same day euro-area inflation stood at 8.1% in May.
- For industry, energy was becoming a strategic matter, not just one of price: it is wise to analyse where the supply depends on.
On 30 and 31 May 2022 European leaders agreed to ban most Russian oil imports, those arriving by sea, as part of a sixth package of sanctions. That same day it emerged that euro-area inflation stood at 8.1% in May. Sanctions and inflation thus appeared in the same headline. For many companies, the practical effect would be twofold: more uncertain energy prices and new obligations to verify what is bought and from whom.
The decision was a major step in the energy relationship between Europe and Russia. Until then, Russian oil had been a significant source of supply for many European countries, and the agreement meant giving up a good part of it. For companies and consumers, the immediate question was what effect it would have on prices and on security of supply.
What an embargo is
An embargo is a legal ban on importing or exporting certain products. European leaders decided it as part of a sixth package of sanctions, and it applies to companies in all member states, which must stop buying that oil on the terms that are set. Within the Union, sanctions are binding on all member states, so a Spanish company is subject to the same rules as a German or French one.
In practice, an embargo is not applied overnight: it usually includes transitional periods, exceptions and detailed rules on contracts already signed. Affected companies need to know those terms precisely, because buying or transporting prohibited goods can lead to penalties. Again, reliable information lies in the text of the rule, not in the summary of the news. Compliance usually requires checking the origin of the goods and the route they have followed, not just the identity of the immediate seller.
Weaning off Russian energy
Europe was starting to wean itself off Russian energy at a high cost. Replacing an important supplier means finding other sources, often further away and dearer, and adapting transport and refining infrastructure designed for a different type of crude.
That change cannot be made in a few weeks. It requires new contracts, new shipping routes and, at times, technical adaptations at the plants that process the crude. While the transition is completed, markets are more sensitive to any incident, and prices can show more volatility. Anyone who depends on fuel and energy for their activity should allow for this. Reducing dependence is a medium-term goal, and the transition has costs that are shared between companies and consumers.
Energy as a strategic matter
For industry, energy was becoming a strategic matter, not just one of price. Companies with high energy consumption should analyse where their supply depends on, what alternatives they have and how these would affect future costs, alongside the inflation already pressing on everything else. Customers and lenders may also ask about the company’s exposure, so having a prepared answer is a matter of credibility.
A practical way to approach it is to include energy in planning as a risk with its own name, owner, scenarios and mitigation measures: forward contracts, efficiency, alternative sources or agreements with other consumers. These are not decisions to improvise once the price has already risen. And although the risk cannot be eliminated, it can be understood and managed. Efficiency, self-generation and supplier diversification do not remove energy risk, but they reduce it and buy time to react.
Security of supply was ceasing to be a technical detail and entering the boardroom.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
