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EU commences phased boycott of Russian crude oil.

Russian Crude

The European Commission has formally drafted a long-awaited ban on Russian crude oil imports, according to the Wall Street Journal, and it circulated the details to EU member states on Tuesday.

If adopted, the measure would force Russia to sell its oil at a discount to faraway buyers, like refiners in India and China.

The proposed text would require most EU member states to phase out Russian crude imports within six months and all Russian refined products within the year, officials told the paper.

The plan contains a 20-month extension for Hungary and Slovakia, which both rely heavily on Russian crude oil supplies.

All 27 EU member states must agree to the plan in order for it to be enacted.

The government of Hungarian President Viktor Orban has been vocal in its objections to the idea of a Russian crude oil ban, and the carveout would allow Hungary to continue to source Russian oil for the foreseeable future.

In addition to a ban on Russian oil, the sixth round of sanctions will also remove additional Russian banks from the SWIFT financial messaging system and list Russian “disinformation actors,” according to EC foreign affairs commissioner Josep Borrell.

The possibility of an outright ban on Russian oil reflects significant efforts by EU member states and oil refiners to find alternate sources of crude.

 Germany, which once sourced about one-third of its oil from Russia, now expects to fully transition to other suppliers by the end of the summer.

It may also accelerate a trend of “self-sanctioning” by Western oil traders, who have already begun limiting their exposure to Russian crude because of the perceived risks.

 If these barrels are locked out of the market in Europe and North America, they will have to be sold for less to buyers in India, China and elsewhere – but the obstacles are significant.
According to Bloomberg, the options for financing and insuring Russian oil are getting slimmer, and Asian buyers are demanding steep discounts to cover the inconvenience.

Assuming that Russia can find alternate markets to absorb production, tanker owners could be up for a windfall with the reshuffling of the oil trade.

With fewer short-haul shipments running between Russia and Europe, tonne-mile demand for long-haul transport of oil could rise.
 In addition, Western sanctions on Russian shipping have restricted the trading patterns and insurance options for Russian tanker companies, creating more opportunity for their foreign competitors, according to shipbroker Gibson.

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Foreign

EU freezes Russian oligarchs’ assets worth over 10 billion Euro  (Rs82K crore )

Russian President Vladimir Putin

In retaliation to the Russian military offensive against Ukraine, the European Union has blocked the assets of Russian oligarchs worth nearly €10 billion (over Rs 82K crore) as part of sanctions, TASS reported.

Further, another set of frozen assets was reported in the month of April.

As the war in Ukraine has reached its 91st day, the EU has provided billions of euros in military aid to war-torn Ukraine to fight against Russia’s unjustified invasion, further imposing severe sanctions on Moscow.

Earlier in April, the European Union had frozen about €30 billion (Rs 2,48,418 crore) in assets of Russian and Belarusian oligarchs and businesses.

 This came on April 8, when European Justice Commissioner Didier Reynders presided over the fifth meeting of the EU’s Freeze and Seize Task Force, which included members from the United States and Ukraine.

Assets worth €29.5 billion have been frozen, and transactions worth €196 billion have been banned, according to the EU statement.

 Didier Reynders had deemed it essential for the EU and its foreign allies so that they can step up their efforts to cease supporting Russian President Vladimir Putin’s war machine.
He emphasised that, in addition to implementing punishments, it is also necessary to track their progress.
He urged all members to take the necessary steps to implement the sanctions on Russia.

Josep Borrell has also recommended taking frozen Russian foreign exchange assets to reconstruct Ukraine.

Apart from this, to fund the costs of reconstructing the war-torn country, the European Union’s top official had recommended taking frozen Russian foreign exchange assets.
 Josep Borrell, the EU’s high representative for foreign policy, spoke to the Financial Times on May 8 about how the US used Afghanistan’s blocked funds to pay compensation to terrorism victims and to provide humanitarian help to the country.
He emphasised that using Russian funds to restore a country devastated by conflict makes sense.
According to the Financial Times report, EU authorities are looking into whether Russian reserves may be redirected towards Ukraine’s building.

Meanwhile, the European Union has approved a 500 million euro military aid tranche for Ukraine.

 After the approval of three tranches of military assistance totaling 1.5 billion euros this year, the fourth tranche would add 500 million euros to financing previously assigned to Ukraine underneath the European Peace Facility (EPF), bringing the total amount to 2 billion euros, according to a statement released by the European Council on Tuesday.

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Foreign

Egypt rakes in $15m daily from Suez canal vessel traffic

The artificial channel of Suez canal
—-generates $5.61 billion in 2020, $6.3 billion in 2221

Egypt is making bountiful harvests of revenue from its man-made Suez canal with daily earnings of $15millon from the maritime traffic.

Mr. Gorge Safwat, Spokesman for the Suez Canal Authority (SCA), made the disclosure on Thursday while hosting 27 top journalists from sub-Saharan Africa at the headquarters of the company in Ismailia District, northeast of Cairo.

Suez Canal stretches from Port Said on the Mediterranean Sea to the city of Suez on the northeastern shores of the Gulf of Suez, separating Egypt from the Sinai Peninsula.

Safwat explained that up to one billion tons of maritime cargo passed through the canal every year and that up to 20,000 ships had passed through the canal in the first quarter of 2022, carrying goods to various countries around the globe.

He said that the canal, the longest man-made in the world, had recorded increased revenue, generating about $5.61 billion in 2020, due to the determination and doggedness of Egyptians.

Safwat announced that the company made about $6.3 billion from its activities last year, saying that the construction of the canal 152 years ago, demonstrated the willpower and can-do spirit of the citizens of the Arab nation.

Tracing the history of the canal, the spokesman said it took the labour of about one million Egyptians and 120,000 deaths to put the canal in place in 1859.

Safwat noted that the number of ships using the canal daily had also increased from 45 per day in 2015 to 60 per day at present, describing the route as one of the safest in the world.

In March 2021, a huge container ship, known as Ever Given, belonging to Evergreen Shipping Lines, got wedged and blocked the Suez Canal, disrupting global maritime trade for weeks.

However, the ship, which the Egyptian Government impounded, was later released after agreeing to a deal on compensation with the government.

The 193-km Suez Canal connects the Mediterranean Sea at the canal’s northern end to the Red Sea in the south and it provides the shortest link between Asia and Europe.

The authorities of the SCA took the visiting journalists on a boat cruise on the old and new canals built by the government.

The journalists noticed the intense maritime activity taking place round the hour on the canal, helping to boost the prosperity of the North African country.

Egypt, which is currently one of Africa’s biggest economies, has embarked on various developmental projects, to sustain its position as a pacesetter in both the Arab world and sub-Saharan Africa.

The rich North African country has a population of about 106 million people, making it the third-largest country in Africa.

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Foreign

Competing economic interests of Europe militarise Gulf maritime waters

Cinzia Bianco, Matteo Moretti

In February 2022, the Council of the European Union (E.U.) gathered in Brussels to discuss the extension of the Coordinated Maritime Presence (CMP) concept to the North-Western Indian Ocean.

First piloted in the Gulf of Guinea at the beginning of 2021, the CMP is a flexible tool to enhance maritime security engagements by promoting shared awareness, analysis, and information in the maritime space among member states.
The Council thus concluded that the E.U. should enhance coordination and cooperation with the European Maritime Awareness in the Strait of Hormuz (EMASOH) surveillance mission and deemed the North-Western Indian Ocean, a region stretching from the Strait of Hormuz to the Southern Tropic and from the north of the Red Sea toward the center of the Indian Ocean, a “maritime area of interest” (MAI).
These decisions — and, especially, the MAI designation — constituted a rare consensus among E.U. member states that Gulf maritime security is a strategic interest for Europe as a whole.

EMASOH, a French initiative, was launched in January 2020 to promote regional de-escalation in the Gulf and ensure freedom of navigation in the seas around the Strait of Hormuz.

Headquartered at the French naval base Camp de la Paix in Abu Dhabi, it was set up in response to the Iranian attacks on tankers and commercial ships in UAE waters and the strikes on the Abqaiq and Khurais oil facilities in Saudi Arabia, both in 2019.
Shortly after the attacks, in January 2020, Belgium, Denmark, France, Germany, Greece, Italy, the Netherlands, and Portugal launched EMASOH as a maritime surveillance mission, arguing that such incidents were undermining freedom of navigation in the Gulf and the safety of ships in the Strait of Hormuz.
EMASOH’s military component, Operation AGÉNOR, includes the eight E.U. countries plus Norway and patrols the waterway with seven vessels and one aerial surveillance unit.
 Since March 2022, the operation has been under Belgian command.
 Seven of the nine participating countries are currently present in the Abu Dhabi HQ, while Portugal and Germany support the mission’s diplomatic track.

The Council’s decision to officially embrace EMASOH, which operates in parallel to the U.S.-led International Maritime Security Construct (IMSC), is a small step in the direction of Europeans acknowledging that they won’t always be able to rely on the United States to defend their interests, even in the Gulf, long perceived in Europe as an “American lake.”

Whither a European security role in the Gulf?

This is not to say that the U.S. is leaving the Gulf or the Middle East more broadly.

Even amid some downsizing over the past couple of years, the U.S. still has more than 13,000 troops and large military bases in the Gulf and it plays a central role in a number of multilateral security missions, including in the maritime space.
 However, the U.S. is certainly recalibrating its involvement, driven by war fatigue at home and shifting interests abroad, including a pivot to contain China in the Asia-Pacific and to end American dependence on Middle Eastern energy supplies, which has long been the primary reason for its regional posture.

Conversely, in light of Russia’s invasion of Ukraine, Europe is seeking to strengthen its energy ties with Middle Eastern suppliers to overcome its dependence on Russian oil and gas — an effort that is only likely to ramp up if the E.U. moves to ban Russian oil imports.

 This has driven European outreach to Algeria and Morocco, as well as a push to reconsider new energy infrastructure to facilitate imports from countries in the eastern Mediterranean.
Some European capitals are also eyeing Iranian gas with renewed interest and are thus doubling down on efforts to revive the Joint Comprehensive Plan of Action (JCPOA) as soon as possible.

While North Africa, Iran, and the eastern Mediterranean are feasible long-term options, current energy infrastructures in these places is either derelict or non-existent, precluding a quick fix for Europe’s energy crisis.

The real jackpot would be securing an energy partnership with the Gulf monarchies, which could increase supplies to Europe much more quickly and have the capacity to stabilize the global energy market at the expense of Russia.
Officials from Italy and Germany have already secured supply deals with Qatar, while France’s TotalEnergies will begin shipping Emirati oil to Europe this month.
 Also this month, the E.U. plans to release a new energy strategy that will feature a green energy partnership with the Gulf monarchies, expanding on existing hydrogen deals between E.U. member states, Saudi Arabia, and the UAE.
 European policymakers understand that if the seas around the Arabian Peninsula become a conduit for a growing share of vital energy shipments to Europe, Gulf maritime security will become a strategic interest for the E.U.

This maritime space is already of strategic importance for Europe economically.

More than 10% of global trade passes through the Strait of Hormuz and the Bab el-Mandeb Strait, together with the Suez Canal.
 A large share of this trade either comes from or goes to Europe.
 Not only do European countries have significant trade relations with Gulf Cooperation Council (GCC) member states, but some GCC ports are also becoming key nodes of economic connectivity between Asia, Africa, and Europe.

Finally, a stronger role for Europe as a security provider in the Gulf has a geopolitical rationale, too.

In fact, it may change how the Gulf monarchies see European countries in the region.
Gulf capitals do not regard European countries as regional security providers, with the partial exception of France and the U.K.
As they are not security or geopolitical actors, Europeans are also not viewed as security or geopolitical interlocutors.
This has prevented them from influencing the policies of the Gulf monarchies in their shared neighborhood — the Mediterranean — or from making significant contributions to de-escalation between the Gulf and Iran, something they strongly support.
 It has also prevented European leaders — even those who do have links to Gulf monarchies, such as France’s President Emmanuel Macron — from persuading Riyadh and Abu Dhabi to unequivocally side with the U.S. and Europe against Russia amid its invasion of Ukraine.
 A more meaningful role for Europeans as security providers in the maritime space also fits well with the upcoming comprehensive E.U.-GCC policy partnership document, to be published later this year, which will encourage more joint training and naval exercises.

Future prospects

The E.U.’s decision to become strategically more involved in the maritime security of the North-Western Indian Ocean will have several future implications.

The CMP will enable the E.U. to share intelligence and operationalize coordination in the North-Western Indian Ocean, effectively establishing links between EMASOH and Operation Atalanta, an E.U. mission to combat piracy off the coast of Somalia.

 Turning the Strait of Hormuz and the Red Sea into one integrated area should enhance the capacity to secure both.

The E.U.’s embrace of EMASOH is the ultimate green light for a new generation of ad hoc, flexible missions that can be deployed in sensitive areas for E.U. interests, offsetting the lengthy decision-making process of the E.U.’s Common Security and Defense Policy (CSDP).

This category of core group missions, which includes Operation Takuba in the Sahel and the European Naval Engagement in the Indo-Pacific, will become even more common and enhance the European projection capability.
 Furthermore, since EMASOH now has a clear mandate from the E.U., both existing members, such as Germany and Portugal, and other countries that were not part of the initial group might be more inclined to contribute militarily.
EMASOH will need to beef up its naval deployments and enhance its aerial surveillance capabilities if it is to become credible amid heightened multipolar competition in the region.

For now, Gulf countries are not in a position to provide maritime security around the Strait of Hormuz and the Arabian Sea on their own.

They continue to argue that the area is of global interest and therefore they should not be the sole actors responsible for maritime security.
Given this, the risk is that Gulf actors will invite more and more international partners — including rivals of the U.S. and Europe, such as China and Russia — to patrol the waters.
 A more significant European presence may deter regional actors from such moves while allowing the U.S. to relinquish some of the security burdens that it wants to offload.

Finally, the European reference to the North-Western Indian Ocean indicates they might soon go beyond the existing operational areas of Atalanta and EMASOH.

 Indeed, some E.U. countries — specifically, France — have argued that the whole Red Sea and the Bab el-Mandeb Strait are vital to European interests.
 By protecting these waterways, E.U. countries could reap three benefits in the short, medium, and long term.
First, they would consolidate a European presence in the Red Sea, where Russia has been seeking to make inroads.
Second, keeping an eye on Bab el-Mandab and Yemen’s Red Sea coast might give Europeans more of a voice in the context of the Yemen conflict.
Third and finally, it could also potentially reduce the Houthis’ ability to use threats against international shipping as leverage against the diplomatic process to end the war.

Dr. Cinzia Bianco is a research fellow at the European Council on Foreign Relations, where she works on political, security, and economic developments in the Arabian Peninsula and Gulf region and relations with Europe. She is also a non-resident scholar with MEI’s Defense and Security Program and a senior analyst at Gulf State Analytics. 

Matteo Moretti is a Junior Member at the International Affairs Institute (IAI) in Rome. His research interests include the EU’s foreign relations, especially with the Gulf. 

The views expressed in this piece are their own.

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