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The European Union is taking aim at Russia's main revenue source: oil

LEILA FADEL, HOST:

The European Union is taking aim at Russia's main revenue source - oil. In response to the ongoing war, over the next six months, the EU plans to wind down imports worth hundreds of millions of dollars a day. That means extra oil on the market that others might buy. But many countries and companies are distancing themselves from Russian oil. NPR's international affairs correspondent Jackie Northam reports.

JACKIE NORTHAM, BYLINE: For energy companies, Russia has always been a challenging but potentially lucrative place to operate. The rewards were often worth the risks. But shortly after the invasion of Ukraine, that changed. George Voloshin is a Paris-based analyst for the global consultancy Aperio Intelligence. He says BP was the first to announce it was pulling out.

GEORGE VOLOSHIN: It was quite, I think, surprising to many observers at such an early stage in the conflict. Then there were Exxon Mobil on the American side. There was then Shell and, more recently, TotalEnergy (ph). And basically, it's all about withdrawing from the market.

NORTHAM: It costs the energy companies, in some cases, billions of dollars to pull out of Russia. But oil traders, shippers and insurance companies, as well as refineries, are also distancing themself from Russia.

Gary Peach, an analyst with London-based Energy Intelligence, says they're worried about reputational risk. They have shareholders and governments to answer to.

GARY PEACH: These companies do not want to be hit - you know, like, sort of a black eye for, you know, buying oil that will essentially go to Moscow and help finance the war effort. So as the war drags on and it gets worse and the images out of Ukraine emerge on TV screens, the pressure is only going to intensify.

NORTHAM: Russia is still pumping roughly 11 million barrels of crude a day, but it's much harder to move now. And it's started running out of storage space. Tankers filled to the brim are waiting on open waters for buyers for the excess oil. All this will be exacerbated once the EU's embargo kicks in by the end of the year, putting roughly 2 million barrels a day back on the market. But Peach says there will still be some buyers.

PEACH: Because oil demand isn't going anywhere. It's needed worldwide, and traders will find loopholes. And, you know, Russia will find out ways - invent creative ways to sell its oil.

NORTHAM: Robert McNally, the president of Rapidan Energy Group, says buyers for the extra oil are already emerging.

ROBERT MCNALLY: The main one everyone's looking at is India. India has started to take a lot more Russian oil.

NORTHAM: But because there's so much Russian oil available, India can get it at a discount, meaning less money for Moscow. Still, McNally says India isn't buying that much.

MCNALLY: India can't just sort of drop its other suppliers, like in the Persian Gulf, and decide to deal only with Russia, right? That'll get them crosswise with the Gulf producers. So I don't think India can offset the loss of Europe.

NORTHAM: Then there's China with its voracious appetite for oil. Voloshin, with Aperio Intelligence, says China is also getting a bargain. But he says some Chinese refineries and oil companies are also distancing themself from Russia.

VOLOSHIN: We're seeing that these companies are also reluctant to get in the crosshairs of U.S. regulators. They also fear that they will just get into financial trouble because the banks aren't willing to lend money anymore because of, you know, Russia's isolation from the world's financial system.

NORTHAM: Voloshin says there could still be some underground sales of Russian oil. But right now, Moscow's options to sell its most profitable commodity are narrowing.

Jackie Northam, NPR News.

(SOUNDBITE OF ...OF SINKING SHIPS' "IT'S EASIER WITH NO DESTINATION") Transcript provided by NPR, Copyright NPR.

Jackie Northam is NPR's International Affairs Correspondent. She is a veteran journalist who has spent three decades reporting on conflict, geopolitics, and life across the globe - from the mountains of Afghanistan and the desert sands of Saudi Arabia, to the gritty prison camp at Guantanamo Bay and the pristine beauty of the Arctic.