MILAN – Even when the European Union decided it Reduction of Russian crude oil imports by 90% by the end of the year, Italy is the only country in Europe to increase it, an unintended consequence of EU sanctions on Russia.
The EU oil embargo, designed to punish Russia for invading Ukraine, is now endangering one of Italy’s largest refineries in Sicily, which would deal an economic blow to the ailing region’s economy.
Italy agreed with its EU partners to cut Russian crude oil imports by 2023, a move Prime Minister Mario Draghi described as “a complete success” that “wouldn’t have been credible just a few days ago”.
But Rome must also grapple with the fate of the refinery in Sicily owned by the Russian company Lukoil. As a result of previous sanctions against Russia, ISAB Srl has paradoxically gone from 15% to 100% of Russia’s crude oil.
That’s because banks have refused to take the risk of lending to Russian-controlled ISAB, which would allow it to buy oil from non-Russian sources, even if it’s not specifically forbidden, Matteo Villa said, Energy Analyst at ISPI Think Panzer in Milan.
Ships with crude oil from the Russian parent company still arrive at the port refinery.
Italy received about 400,000 barrels a day of Russian oil in May, four times the pre-invasion level, according to commodities data firm Kpler. Of this, ISAB received 220,000 barrels per day from Russia.
“Italy is the only country in Europe that is increasing its oil imports,” Villa said, rising from the sixth-biggest importer of Russian oil to the biggest in the three months since the invasion.
The plant employs 3,500 people at three production sites, including a refinery, a gasification plant and a cogeneration plant, in the Sicilian province of Syracuse and risks closure if no solution is found before the embargo comes into effect. The plant and related activities generate half of the province’s gross domestic product and 8% of the region’s economic activity, and processes a fifth of Italy’s crude oil imports.
The future of the refinery was already in jeopardy for a long time due to the Italian energy transition towards more sustainable sources. The embargo only heightened the sense of urgency to find a solution.
“The mood today is even worse than yesterday,” said Fiorenzo Amato, general secretary of the Filctem Cgil trade union in Syracuse. “The industrial location … employs many people and gives families a chance to live.”
Since learning about the embargo, refinery workers have become increasingly concerned about their future.
“It will be a disaster,” said Marco Candelargiu. “We hope they find a solution. You cannot destroy a province. The choice was made long ago to base the economy mostly on the refinery.”
Villa said one solution would be for Italy to temporarily nationalize the refinery, a move allowed for energy emergencies under Italy’s constitution, but a week of discussions has resulted in no agreement.
As an Italian-owned refinery, ISAB would be able to obtain the necessary financing to purchase crude oil from other sources and continue operations while longer-term solutions are sought.
“This is important for employment in Sicily, for supplying Italy with petrol and diesel and for saving our own political face in Europe,” Villa said.
Santalucia reported from Rome.
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https://www.local10.com/business/2022/06/01/italy-imports-more-russian-oil-despite-impending-embargo/ Despite the threat of an embargo, Italy is importing more Russian oil