US to ban imports of Russian oil as war in Ukraine rages

WASHINGTON (CN) — President Joe Biden announced a U.S. ban Tuesday on the import of Russian oil and natural gas, acceding to pressure by Ukrainian President Volodymyr Zelenskyy and a bipartisan coalition of lawmakers on the Hill.

Although Russian oil makes up only a small fraction of the U.S. oil supply, oil and gas are a key revenue source for Russia, the world's largest exporter of natural gas and second-largest exporter of oil.

"We're banning all imports of Russian oil and gas and energy. That means Russian oil will no longer be acceptable to us ports and the American people will deal another powerful blow to Putin is war machine," Biden said in a speech Tuesday morning.

European allies are not levying similar sanctions, though Biden said his decision was made in consultation with other world leaders.

Sanctioning Russian oil is a lower-stakes move for the U.S. than it would be for the United Kingdom or European Union, which rely heavily on Russian natural gas. One-third of Europe's fossil fuel consumption comes from Russian natural gas, a resource the United States does not import.

"We're moving forward with this ban understanding that many of our European allies and partners may not be in a position to join us," Biden said.

Biden's administration had previously expressed hesitancy about backing a ban on Russian oil, citing concerns about rising prices at the gas pump.

High gas prices driven by pandemic woes had already been a political issue for Biden's popularity prior to the Russian invasion. Oil prices have since climbed to staggering highs amid the war and talks of international sanctions on Russia's energy sector.

Gas prices nationwide continue to rise, currently averaging $4.71 a gallon, 55 cents higher than it was last week, according to AAA.

The price of Brent crude oil, the leading price benchmark for oil worldwide, was up more than 7% Tuesday ahead of Biden's announcement.

Merely the talk of sanctions had rattled the U.S. economy Monday, with the Dow Jones industrial average dropping around 2.4% by end of day, an indication of the costs the White House's latest move could have at home.

"This is a step that we're taking to inflict further pain on Putin, but there will be costs as well here in the United States. I said I would level with the American people from the beginning and when I first spoke to this, I said defending freedom is going to cost, it's going to cost us as well in the United States," Biden said.

"I'm going to do everything I can to minimize Putin's price hike here at home," the president later added.

Despite growing economic concerns, lawmakers had been increasing their pressure in recent days for U.S. action against Russian oil.

Speaker of the House Nancy Pelosi spoke out in support of an oil ban last week and has since signaled that House lawmakers will move ahead with legislation against Russia in addition to Biden's sanctions.

A bipartisan group of lawmakers released framework on Monday that would ban imports of all Russian energy and cut off regular trade relations with Russia and Belarus.

Rising global oil prices have Republican lawmakers pushing for the U.S. to expand domestic oil production and authorize the previously shuttered Keystone XL pipeline project, even though opening the pipeline would not significantly boost American oil production.

The U.S. and its allies have released 60 million barrels of oil from strategic reserves to counter high prices, and Biden administration officials spent the weekend in talks with Venezuela about energy security — hinting that other large oil producers may release more barrels into the market to drive prices down.

But Democrats and the White House have emphasized that, as long as the U.S. relies heavily on oil and natural gas, moments of volatility in the global market will always impact costs, even if that oil and gas is produced entirely at home.

"Let's say the U.S. were totally self-sufficient in crude oil and Russia was still a major supplier in the market and prices were going up because of the war in Ukraine," said Robert Kauffman, professor in the Earth and Environment Department at Boston University. "U.S. oil prices would still go up as well. U.S. companies could either sell oil at a cheap price to U.S. customers or export it and sell it at the world price. And oil companies want the highest profit, so that's what they would do. You can't insulate yourself from that world price."

Biden spoke directly to American oil and gas companies Tuesday, warning them not to use rising global prices as an excuse to price gouge.

"Let me say this to the oil and gas companies and to the finance firms that back: We understand Putin's war against the people of Ukraine is causing prices to rise. We get that, that's self-evident. But it's no excuse to exercise excessive price increases or padding profits or any kind of effort to exploit this situation or American consumers, exploit that Russia's aggression is costing us all," Biden said.

Whether the sanctions will severely constrain Putin is unlikely as the U.S. is not a major buyer of Russian energy, and European allies remain hesitant about passing similar bans. They would pay a steep price if they were to sanction Russian oil and gas, though such a measure could be effective at bleeding dry the Russian economy but would hurt the global oil market in the process.

While many European leaders have been cagey about targeting Russian oil and gas, the U.K. on Tuesday announced new sanctions on Russian oil that will work in phases to ban Russian oil imports by the end of the year. The U.K.'s sanctions does not apply to natural gas.

"Unless many, many, many countries join that. I don't think that's really going to have a major impact," Kauffman said of the U.S. oil sanctions.

The sanctions come on top of a bevy of previous economic measures aimed to cripple the Russian economy including sanctions on the Nord Stream 2 pipeline, some of the country's largest banks, high-ranking members of the Russian oligarchy and Putin himself.

"This much is already clear: Ukraine will never be a victory for Putin. Putin may be able to take a city, but he'll never be able to hold the country. And if we do not respond to Putin's assault on global peace and stability today, the cost of freedom and to the American people will be even greater tomorrow," Biden said.