US President Joe Biden announced in Washington DC on Tuesday (8/3/2022) local time, or Wednesday (9/3) West Indonesia Time, an immediate ban on oil and other energy imports from Russia.
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Kompas Team
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AFP/DANIEL SLIM
Gasoline prices are seen on a gas pump in Arlington, Virginia, on March 8, 2022. - The AAA reported the average price of gas in the US on March 8 was $4.173 per gallon. US President Joe Biden announced a ban on US imports of Russian oil on Tuesday, in the administration's most far-reaching action yet to punish Moscow for invading Ukraine.
The Ukraine crisis, which is widely considered as an eruption of tensions between the United States and Russia, has turned into an energy war. After receiving a series of economic sanctions, Russia is now launching its retaliation measures.
KIEV, WEDNESDAY — The Ukraine crisis, which has forced Western countries to impose a series of economic sanctions on Russia, has turned into an “energy war.” The United States has stopped energy imports from Russia. In response, Russia has also indicated it will stop its energy exports.
US President Joe Biden announced in Washington DC on Tuesday (8/3/2022) local time, or Wednesday (9/3) West Indonesia Time, an immediate ban on oil and other energy imports from Russia. He said the import ban was imposed as part of measures to force Russia to stop attacks on Ukraine. Two United Kingdom-based oil giants, BP and Shell, also planned similar moves.
“We're banning all imports of Russian oil and gas energy. That means Russian oil will no longer be acceptable in US ports,” Biden told reporters.
The policy is temporarily implemented until December 31, 2022.
Russian President Vladimir Putin immediately responded to the move by banning the export and import of raw materials and a number of other commodities. In Moscow, Putin issued a decree banning the export and import of raw materials to ensure the safety and sustainability of industry in Russia. The policy is temporarily implemented until December 31, 2022.
The Russian government and parliament will soon decide which commodities to be put on the import-export ban list. Moscow has ensured that there will be no ban on imports of products for private consumption. The ban will be imposed only on imports of commodities for industries.
AFP/ DIMITAR DILKOFF
A military vehicle drives along Tverskaya street during a rehearsal for the WWII Victory Parade in Moscow on May 4, 2021. – The Victory Day parade at the Red Square on May 9, 2021, marks the 76th anniversary since the capitulation of Nazi Germany in WWII.
Before the decree was announced, Russian Deputy Prime Minister Alexander Novak warned that Russia had the right to stop gas deliveries to Europe. However, he said the termination would be detrimental to all parties.
Previously, the Ukrainian crisis had pushed up oil prices to above US$100 per barrel. Following the announcement from Washington and Moscow, global oil prices further skyrocketed.
The price of Brent crude oil surged to $130.38 per barrel, meanwhile, West Texas Intermediate oil price further increased to $125.58 per barrel.
The increase in oil prices also pushed up the prices of other global commodities. For example, the price of nickel and tin, among Indonesia’s main commodities, increased more than 4 percent. The price of palladium, an important metal used in the semiconductor industry, also sharply increased. As much as 40 percent of the world's supply comes from Russia.
The increase in oil prices was discussed at an energy conference in Paris. The executive director of the International Energy Agency (IEA), Fatih Birol, said the IEA could release more oil stocks to curb the sharp increase in crude oil prices. The IEA represents 31 industrialized countries. Russia is not included.
The executive director of the Reforminer Institute, Komaidi Notonegoro, said the increase in oil prices would further put pressure on the national oil and gas trade balance due Indonesia’s growing reliance on oil imports. Indonesia has become a net oil importer due to its high oil and gas needs, which account for 51 percent of the national energy consumption.
As a result, the oil and gas trade balance deficit would further widen. Komaidi said Indonesia might not be able to cover the need for additional foreign exchange to finance oil and gas imports despite the rise in foreign exchange earnings from other commodities.
As an illustration, Indonesia would need about $49.27 billion to finance oil and gas imports if the oil price reached $120 per barrel. Of the total, $44.04 billion are needed to finance imports of oil and fuel products and another $5.23 billion for liquefied petroleum gas (LPG) imports.
"With such an illustration, foreign exchange needs for oil and gas imports can reach almost 35 percent of Indonesia's current foreign exchange reserves, which are now recorded at around $141 billion," he said.
However, at the same time, the increase in oil prices would also increase the government’s spending for oil and gas subsidies.
In fiscal matters, Komaidi estimated that every $1 increase in oil prices per barrel would increase oil and gas revenues in the 2022 State Budget by around Rp 3 trillion. However, at the same time, the increase in oil prices would also increase the government’s spending for oil and gas subsidies.
AP/Alexei Alexandrov/AZ
People wave Russian national flags celebrating the recognizing the independence in the center of Donetsk, the territory controlled by pro-Russian militants, eastern Ukraine, late Monday, Feb. 21, 2022. In a fast-moving political theater, Russian President Vladimir Putin has moved quickly to recognize the independence of separatist regions in eastern Ukraine in a show of defiance against the West amid fears of Russian invasion in Ukraine.
Furthermore, he added, the price increase triggered by geopolitical conflicts and wars indicated that the security of oil and gas supply remained a major issue that could not be ignored, even in the era of energy transition.
Separately, the energy transformation program manager at the Institute for Essential Service Reform (IESR), Deon Arinaldo, said that when gas supplies from Russia were hampered, European countries would start thinking about how to reduce their reliance on energy commodities. Indonesia can also make an energy transition, but it needs to attract new and renewable energy investments into the country to support the transition program.
“There are many business/industry players who are willing to invest in renewable energy. It’s just a matter of how the government facilitates it. It's now time to consider the energy transition as a strategy for economic development and growth," he said. (AP/A F P/ R E U T E R S /BEN/RAZ/ MED)
(This article was translated by Hendarsyah Tarmizi).
