A European ban on Russian oil and gas imports could have unintended economic consequences, US Treasury Secretary Janet Yellen said Thursday.
Major European countries including Germany have faced calls to stop buying energy from Russia and starve its economy of revenue in retaliation for its invasion of Ukraine, which has sent more than five million people fleeing.
Speaking to reporters following a meeting with Ukrainian Prime Minister Denys Shmyhal and Finance Minister Sergiy Marchenko in Washington, Yellen said such a ban could ultimately cause more harm than good.
“Europe clearly needs to reduce its dependence on Russia with respect to energy. But we need to be careful when we think about a complete European ban on, say, oil imports,” Yellen said.
A European energy ban would raise global oil prices “and, counterintuitively, it could actually have very little negative impact on Russia, because although Russia might export less, its price it gets for its exports would go up.”
Referring to a proposed ban, Yellen said, “if we could figure out a way to do that without harming the entire globe through higher energy prices, that would be ideal.”
The United States has banned purchases of Russia oil, among a host of sanctions Washington has announced targeting Moscow’s economy, many of which have been matched by Europe and allies elsewhere.
The European Union, which imports around 45 percent of its gas from Russia, is working on broadening its sanctions to include embargoes on oil and gas but officials told AFP last week such measures would take “several months.”
The IMF this week said the war in Ukraine will weigh heavily on economic growth in the eurozone, downgrading its forecast for this year to a 2.8 percent expansion from its previous 3.9 percent released in January.
However Pierre-Olivier Gourinchas, the IMF’s chief economist, said in an interview the main risk to the outlook is an escalation of sanctions, in particular an embargo on Russian gas, which would cause a “quite severe” slowdown over the short term in countries like Germany.
If that were to happen, “we would have a fairly significant downward revision of the economic forecasts for the euro zone,” he said.