Wednesday, Mar 9, 2022 • 22min
Will Banning Russian Oil Hurt Russia, or the U.S.?
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On Tuesday morning, President Biden took to the podium at the White House to deliver a solemn and provocative speech. As punishment for waging war on Ukraine, he announced, the United States would cut off Russian oil imports.
Mr. Biden said the move would require some sacrifice, but would be for the greater good.
How much will the ban hurt Russia, and American consumers?
Guest: Clifford Krauss, a national energy business correspondent for The New York Times.
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(3)
Michael Barbaro
Clifford Krauss
Joe Biden
Transcript
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Michael Barbaro
00:32
From
The New York Times
, I'm Michael Barbaro
. This is The Daily
.Share
00:42
Today.
The United States
unleashes its most dramatic punishment so far against Vladimir Putin
for waging war on Ukraine
by banning the importation of Russian oil.Share
01:03
I spoke to my colleague, energy reporter Clifford Krauss, about just how much that will hurt
Russia
and American consumers.Share
01:22
It's Wednesday, March 9.
Share
01:38
Cliff, tell us about this speech that President
Biden
delivered on Tuesday.Share
Clifford Krauss
01:42
On Tuesday morning, President
Biden
walks up to the podium at the
White House
-Share
Joe Biden
01:47
Good morning, folks.
Share
Clifford Krauss
01:47
And solemnly delivers a speech, a provocative one that we weren't really sure he would ever give.
Share
Joe Biden
01:55
Today, I'm announcing
the United States
is targeting the main artery of Russia's
economy. We're banning all imports of Russian oil and gas and energy.Share
Clifford Krauss
02:05
He said I'm going to cut off all Russian oil imports to
The United States
in order to hurt Vladimir Putin,
to punish him and try to end his war against Ukraine
.Share
Joe Biden
02:22
This is a move that has strong bipartisan support in
Congress
and, I believe, in the country. Americans have rallied support, have rallied to support their Ukrainian people, and made it clear we will not be part of subsidizing Putin's
war.Share
Clifford Krauss
02:35
Biden
stressed the broad support for this policy among Congress,
and also among Americans in general. And he said it's going to come with some sacrifice.Share
Joe Biden
02:44
The decision today is not without cost here at home.
Putin's
war is already hurting American families at the gas pump. Since Putin
began his military build up on Ukrainian borders, just since then, the price of the gas at the pump in America went up 75 cents. And with this action, it's going to go up further. I'm going to do everything I can to minimize Putin's
price hike here at home.Share
Clifford Krauss
03:07
But he said, in the end, that sacrifice would be for the greater good.
Share
Joe Biden
03:11
When the history of this war is written,
Putin's
war on Ukraine
will have left Russia
weaker and the rest of the world stronger. And God bless all those heroes in Ukraine
. And now I'm off to Texas. Thank you very, very much. I know there's a lot of -Share
Michael Barbaro
03:25
So Cliff, let's talk about the points that
Biden
makes in this speech one by one. And let's start with Biden's
biggest claim of all, and really his entire rationale for taking this step, which is that banning oil imports from Russia
is a powerful blow to Vladimir Putin
that will make it harder for him to wage war on Ukraine
. Is that correct? Is this a powerful blow to Vladimir Putin
?Share
Clifford Krauss
03:55
It may be. Alone it isn't all that important because
the United States
is importing about 600,000 barrels a day of oil and petroleum products, which is more or less 10% of what Russia
sends abroad. But basically, energy is Russia's
only industry. Okay, so once you throttle the exports of energy, you are really hurting the country. The biggest companies in Russia
are oil companies.Share
04:36
The way the Russian government gets its money is from the oil companies. So you really are sticking a dagger into the heart of the Russian economy and its capacity to send troops into the field. So I think it is important, although the numbers would suggest that it alone would not be enough to bring
Putin
down.Share
Michael Barbaro
05:07
Cliff, you just used the word "alone", which I assume refers to the fact, as
Biden
did in this speech, that European countries are not banning oil imports alongside the US. And that stands out, because so far the US And Europe have very much coordinated their punishments of Russia
since the war began. What would be the impact of European countries doing what the US
has just done?Share
Clifford Krauss
05:33
It would be an enormous deal if Europe were to stop importing more than three million barrels a day of Russian oil. But they just can't do that.
Share
Michael Barbaro
05:46
They can't do that why?
Share
Clifford Krauss
05:48
Because they depend on that oil. It would be impossible for them to drive their cars, run their transportation systems without oil for many countries in Europe. And so that would be just too much for them to do that. There are other countries that can. The United Kingdom said that they were going to ban oil imports from
Russia
over the next year. Canada is also doing it. But for many countries, Russia
is the number one source of hydrocarbons, oil and natural gas. In fact, they get about a third of their energy from Russia
. So banning all Russian oil or natural gas during the winter, mind you, when people need to heat their homes, that just is not practical.Share
Michael Barbaro
06:36
So given that Europe can't match this move, if you're
Russia,
for now you really just have to make up for the 600,000 barrels of oil a day that are currently bought by the US,
right? Is that difficult to do? Can Putin
work around that?Share
Clifford Krauss
06:55
Yes, actually there are several things that
Russia
can do. But they'll need cooperation from other countries, primarily China. China
is a big importer of Russian oil, currently it's pipelines are full. But it could accept more oil, probably at a steep discount, which is the way China
bargains, by ship. Those tankers, it'll take days, if not weeks to organize this. But tankers that would be going from Russia
to the United States
and Europe, and other places could go to China
instead.Share
07:40
And
China
could make up a good bit of the four million barrels, more or less, that are going to Europe and The United States
every day and then import less from the Middle East and other places. And that oil in turn could go to Europe and The United States
. So you could have a reshuffling of the deck. And also you have India,
which continues to buy oil from Russia
. India
and China
are big economies, they have their own foreign policies. The question is, how much do they want to be identified with Russia
and its campaign in Ukraine
?Share
Michael Barbaro
08:28
So Cliff, just to recap, the
US
move here isn't crippling to Russia
. Much of Europe hasn't come on board, which would potentially be crippling to Russia
. And from what you just said, Russia
may be able to make up for what the US says, it will not be buying by turning to China
or India
. So altogether, this doesn't sound like a fatal blow, a game changer, something that's going to in a matter of days end this war.Share
Clifford Krauss
08:59
Well, let me try to unpack that.
Michael
, it's too early to say how crippling this will be. And as far as ending the war goes, you know historically, sanctions have an uneven record as a foreign policy tool. Sometimes they work, as in the case of South Africa. And sometimes they don't work, such as with Iraq, Iran
, Venezuela
, Cuba. Or they don't work well or quickly. So, you know, we will see it's very hard for the United States
, which basically, you know, The United States
consumes 1/5 of the world's oil, which is quite a lot. We produce a lot of oil, but we're not the entire world economy, far from it.Share
09:52
It's not like the end of
World War II
where we were, you know, the 100-pound gorilla. In and of itself, this ban is not going to be a fatal blow. It's not going to end the war. It is one more tool that the United States
and its allies have to try to help the Ukrainians and make the invasion that much more painful for Russia
and President Putin
.Share
Michael Barbaro
10:36
We'll be right back.
Share
Break
Michael Barbaro
11:41
So, Cliff, we're still trying to figure out exactly how much pain this is going to cause Russia. But in his speech,
Biden
made very clear that this will cause pain to Americans. So talk about that a little bit. Exactly how much pain will this ban on oil imports from Russia cause within the United States?
Share
Clifford Krauss
12:03
It will create a lot of pain directly and indirectly. Directly because oil is the main component of the price that drivers pay at the pump. So oil prices go up, gasoline prices go up. And already gasoline prices have been soaring. Every state's different, of course, but $4 a gallon and in some states $5 a gallon and going higher. Every time people see the price of gasoline go up on their corner, it hurts. And then less directly is the increase in prices of diesel, which is also, you know, oil.
Diesel,
of course, is what truck drivers are buying, and it runs our transportation system for goods, not just on trucks, but on trains.Share
13:04
And then jet fuel. Jet fuel also comes from oil. So this is going to hurt the airlines, and it's going to mean that people who were hoping that now that the
Covid
pandemic seems to have receded. We can go on vacation now, well, that airline ticket is going to cost a lot more.Share
Michael Barbaro
13:24
Can you just explain why gas prices will go up as a result of this? Because from everything you just said, we don't get that much oil from
Russia
. So how does this work?Share
Clifford Krauss
13:34
Okay, well, there are two things. First of all, gasoline prices are determined by oil prices, and the oil price is a global price. Okay, so when there are shortages in Europe or Asia and the price of oil goes up, it goes up for all of us. The world consumes approximately 100 million barrels a day and the world produces approximately 100 million barrels a day. So you cut off, you know, a couple of million barrels, and suddenly we're a little short. The price will go up a lot higher than you might expect.
Share
Michael Barbaro
14:20
So, Cliff, back to Biden's speech. Did he say how he plans to mitigate this pain to lessen it?
Share
Clifford Krauss
14:29
Well, He talked about releasing oil from the Strategic Reserve. The 60 million barrels, I believe, was the number he used.
Share
Michael Barbaro
14:39
This is a reserve of oil that the US keeps for basically emergencies.
Share
Clifford Krauss
14:43
It's basically for emergencies. We, and the other industrialized countries and even
China,
have these reserves. We've been coordinating with other countries. The release of the reserves. We started doing this the end of, the latter part of last year. It's had very little impact. So when you think about a release of 60 million barrels, which will happen over time. That's basically three days consumption in the United States
. So it's not that impactful.Share
Michael Barbaro
15:16
And based on your reporting, can the
US
pretty quickly make up for the oil that it has been getting from Russia
, from alternate providers, alternate countries?Share
Clifford Krauss
15:26
If all things go right, most of the Russian barrels can be replaced, but it would take six to eight months at best.
Share
Michael Barbaro
15:37
Wow.
Share
Clifford Krauss
15:37
So what you have is, first of all,
the United States
could increase its production over time. But at the moment there's a manpower shortage, there's a sand shortage for hydraulic fracturing. There just is not the capability to rev it up that fast, but we could increase our production another million barrels a day. So that's something. If you can renegotiate the nuclear agreement with Iran
and end sanctions with Venezuela
, you could probably get -Share
Michael Barbaro
16:16
These are not things that happened overnight.
Share
Clifford Krauss
16:18
Tings that, but there's movement. That could be another million and a half barrels a day. And then you have Saudi Arabia, the United Arab Emirates and Kuwait, which collectively have spare production capacity of about 2.5 million barrels a day.
Share
16:43
If you can convince them to produce more, and they've been very cautious and by the way, they happen to be in an alliance with
Russia
called OPEC +. If you could do all of that, we'd be in much better shape, especially considering that probably demand will come down as prices go up. So you put that all together, we can balance things. But as you can see, it means that a lot of things have to go right at the same time. It's not going to be easy.Share
Michael Barbaro
17:17
Right. Cliff, stepping way back, Biden's pitch here in this speech essentially seems to be I know this is going to be painful. I'm asking the American people to make a sacrifice in the name of the Ukrainian people and their freedom, and I know it may not change the course of this war. But he seems to be thinking that Americans will support this. He talked about bipartisan support for this decision. But I wonder if that's realistic, given that Americans have been struggling with inflation for quite some time, and they're so sensitive to gas prices.
Share
Clifford Krauss
17:55
I think he was obliged to make this speech. I think this is a defining moment and I think the American people, while we're very divided, of course, we do tend to come together in moments of crisis and challenge. This is a national challenge, and I think a lot of people are going to go with the president. I mean, including Republican members of
Congress
.Share
18:23
So I think because Republican members of
Congress
are saying we need to do something, and we need to cut off Putin
, it gives him political cover. He needed to take a leadership role because Congress
would have done it without him.Share
Michael Barbaro
18:39
Really?
Share
Clifford Krauss
18:39
And that would have made him look very weak.
Share
Michael Barbaro
18:41
They could do that.
Share
Clifford Krauss
18:43
Yeah, I think
Congress
was moving in that direction. You could see it. Nancy Pelosi
and the Republican leadership of Congress
aren't usually on the same team. But on this issue they are, and they were actually ahead of the Biden
administration. I'm sure when Biden
was weighing this decision, he considered the damage and the risk to the American economy.Share
19:11
But at the end of the day, it made political sense for
Biden
to embrace this policy, a policy that was called for by Democrats and Republicans in Congress
and seems to have the support of the American people in polling. That by embracing it and getting ahead of the issue. He was appealing to the country to unify at a moment of crisis. So that it's not just you're paying higher prices and you're suffering. You're suffering for a cause.Share
Michael Barbaro
19:50
Right, which is perhaps why
Biden
is calling this Putin's
price hike.Share
Clifford Krauss
19:56
Exactly. I mean, there's the marketing, it's the
Putin
price, not the Biden
gasoline price.Share
Michael Barbaro
20:05
So in other words, this could end up being, in theory, a political boon for
Biden
rather than a political burden. Gas prices are going up, but Americans can now blame Putin
. And they can unite around a greater cause.Share
Clifford Krauss
20:22
Absolutely. I mean, it's a deflection. And if
Russia
gets bogged down and eventually has to negotiate and withdraw, Biden
can take at least some of the credit for getting behind the Ukrainian people. And one way or another, I think Americans are more willing to pay higher prices at the pump if they believe that this sacrifice is in solidarity with people who are suffering on their television screens day in and day out. I think that American people feel for the Ukrainian people, and they're willing to pay a higher price. At least, you know, many Americans are going to feel that way. For how long, we're not sure.Share
Michael Barbaro
21:21
Well, Cliff, thank you very much.
Share
Clifford Krauss
21:23
Good to be with you.
Share
Michael Barbaro
21:28
On Tuesday, the average price for a gallon of regular gasoline in the
US
hit a new high of over $4. An increase of 72 cents from just a month ago. At the same time, efforts to further isolate Russia
grew. Several major American brands, including Mcdonald's, Pepsi and Starbucks, said they would suspend their operations in Russia
in protest of the war in Ukraine
.Share
21:59
Meanwhile, in
Russia,
Putin
seemed to acknowledge the economic pain inflicted on his country by signing a law that would increase payments to retirees and lower-income families. As of Tuesday night, the Russian army had yet to take control of any major Ukrainian cities, except the southern ports of Kherson
, as Ukrainian forces continued to successfully defend much of the country.Share
22:34
We'll be right back.
Share
Break
Michael Barbaro
23:18
Here's what else you need to know today.
Share
23:21
On Tuesday, the first trial of a participant in the January 6 attack on the US
Capitol
ended with guilty verdicts on all counts in a major victory for federal prosecutors. Jurors found Guy Reffitt guilty of five felonies, including obstruction of an official proceeding, armed trespassing, and witness tampering. The trial featured testimony against Reffitt from his own children, who said he threatened to kill them if they turned in to police. Nevertheless, his son met with an FBI agent that same day and reported his father's role in the attack.Share
24:08
Today's episode was produced by Sydney Harper, Luke Vander Ploeg and Diana Nguyen. It was edited by John Ketchum and Larissa Anderson. Contains original music by Elisheba Ittoop and Dan Powell, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.
Share
24:43
That's it for
The Daily
. I'm Michael Barbaro
, see you tomorrow.Share
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