The Russian oil embargo is likely to add to the problems already facing both Russia and the European Union, analysts polled by Germany’s Der Spiegel.
Due to the ban on oil imports from Russia, which the EU introduced this week as part of the sixth round of Ukraine-related sanctions, inflation in the bloc will continue to rise, Guntram Wolff, the head of the Brussels-based think tank Bruegel, told the newspaper.
For EU members, this could “mean the worst of all worlds,” he said, as businesses and consumers will suffer from rising oil prices. The economist also expects a “considerable loss of purchasing power” across the bloc, and governments will likely try to cushion the price shock with fuel rebates, tax cuts, and income support, which will only drive up debt.
The situation could also increase pressure on the European Central Bank, Wolff says, as it will have to raise interest rates in order to bring inflation under control, while making sure that the risk premiums for highly indebted countries such as Italy or Greece do not become too big.