Russia's economy could spiral into a depression under an EU oil embargo. An energy analyst breaks down why Moscow won't be able to rely on China and India to fill the gap.

A sweeping European Union oil embargo is more likely now that Germany is ready to stop buying Russian oil.

Russia's economy is projected to contract by more than 10% this year. The economy would likely spiral into a depression if an EU embargo happens, according to Matt Smith, lead oil analyst at Kpler.

Without European buyers, Russia would have to find somewhere to put 2.5 million barrels a day. Unless Moscow can sell that supply quickly or at least find a place to store it, there is a good chance Russia will have to cut its oil production.

Smith said that Russia could use its extensive network of pipes as storage space, but that wouldn't hold all the excess supply.

The EU embargo would cause a hard-to-fill hole in Russia's economy. The Rhodium Group says that oil export revenue to Europe accounted for more than a quarter of Russia's GDP in 2011.

Smith said that a decline in export revenue will result in a decline in the economy.

Why Putin can't count on China or India

India is set to import Russian crude at a rate of 600,000 barrels per day as the lure of steep discounts outweighs international pressure to cut off business ties.

In the event of an EU embargo, China could help absorb some of Russia's oil. Smith thinks the two countries could take in an additional 1 million barrels per day from Russia.

In China, oil inventories are 90 million barrels below their peak. Russian oil could be used to replenish Beijing's stockpile if it pivots away from current suppliers.

Even if China and India increase Russia energy imports, it is highly unlikely that they will absorb all of the stranded barrels.

India typically imports about 4.5 million barrels of crude per day, so it would be difficult to pull in a huge amount of additional crude given it has a large amount of imports from the Middle East.

Getting insurance for new cargo or finding enough vessels to accommodate an influx of oil are some of the logistical issues he cited.

Under Beijing's zero- Covid policies, China's demand for energy has dropped, and its own oil refineries have stopped refining.

He said it was possible that China could still buy more Russian oil and that it was waiting for the EU embargo to kick in so it could take advantage of the oil discounts. Moscow can expect to make less oil revenue.

Every single dollar a country is paying for Russian oil is funding the war in Ukraine. Smith said that the goal is to cut off Russia's ability to continue the war.