Ukraine wants ‘Iran-style’ sanctions on Russian energy

Russian and Ukrainian flags Source: iStock/3dmitry

Ukraine said European governments can step up sanctions against Russian energy without running out of gas. 

While Russia has been hit with a wide range of financial sanctions, following its invasion of Ukraine, Europe remains dependent on its natural gas to meet demand for heat and power. Ukraine is now trying to convince European governments to turn the screw on energy inflows too, stopping just short of demanding an outright halt. 

“Frankly speaking they should stop using Russian energy as soon as possible, whatever possible,” Yaroslav Demchenkov, Ukraine’s deputy minister of energy, said in an interview on Wednesday on the sidelines of the International Energy Agency ministerial meeting in Paris. “We would like to see official policy of governments of the European countries to introduce financial restrictions on the types of energy which are not easy to replace, including pipeline gas.”

With Russian gas storage almost full, the country would not be able to halt flows of natural gas for more that four to six weeks without impacting production, according to the ministry. Ukraine is therefore suggesting an “Iran-style” sanction, where gas is allowed to flow but the money is kept in an escrow account, to be released in exchange for actions from the Russian government. 

The ministry is calling for an outright ban on pipeline crude oil within nine months’ time, which will allow other suppliers time to ramp up output. It also called for a halt of LNG shipments, while Ukrainian utilities wants to include supplying components to the country’s extractive industries to the boycott.

“On behalf of hundreds of thousands of workers in the fuel and energy complex, we urge you to stop supporting the Russian economy until this country stops the barbaric war against Ukraine,” DTEK Group, NJSC Naftogaz and NPC Ukrenergo said in a joint statement. 

An embargo on energy purchases and sales of components is needed because “the only way to stop this war is to deprive the aggressor country of the means to finance it,” the utilities said. They cited the need to halt purchases of gas, coal and electricity, and the supply of engines, turbines, mine, and other power equipment.

As governments and the EU Commission discuss ways to reduce the continent’s reliance on Russian energy, it has so far been left mostly to individual companies to “self-sanction” in terms of shunning purchases of fuels. 

© 2022 Bloomberg L.P.

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