President Vladimir Putin warned the West on Friday that continued sanctions against Russia over the war in Ukraine would risk catastrophic increases in energy prices for consumers around the world.
Putin, speaking of the sanctions against Russia as a declaration of economic war, said Western calls to reduce dependence on Russian energy had made world markets “fever” with spikes in oil and gas.
European Union customers have said they want to phase out Russian gas, while leaders of the Group of Seven said last month they wanted to explore “price caps” for Russian fossil fuels, including oil.
“Sanction restrictions against Russia are causing much more harm to the countries that impose them,” Putin told Russia’s oil and gas industry leaders, including Rosneft Chief Executive Igor Sechin and Deputy Prime Minister Alexander Novak.
“Further use of sanctions could lead to even more serious – without exaggeration, even catastrophic – consequences for the global energy market.”
Putin’s February 24 invasion of Ukraine and the imposition of the most severe sanctions in modern history by the West have undermined the assumptions of energy and commodity markets – while curtailing global growth.
As the Russian president grapples with a major war, the biggest geopolitical crisis and the biggest Russian economic challenge since the fall of the Soviet Union in 1991, the 69-year-old Kremlin chief has repeatedly indicated that he is not in the mood to back down. to pull.
Energy is one area where the Kremlin still holds sway — and European powers, including Germany, fear he may be on the cusp of cutting supplies.
Russia is the world’s second largest oil exporter, after Saudi Arabia, the world’s largest exporter of natural gas and the world’s largest wheat exporter. Europe imports about 40 percent of its gas and 30 percent of its oil from Russia.
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With prices already rising, the world is bracing for further supply disruptions from Russia: The Nord Stream 1 pipeline under the Baltic Sea, a vital supply route to Germany, will undergo maintenance from 11 to 21 July.
Gazprom has reduced the pipeline’s capacity to just 40 percent, citing the delayed return of equipment maintained by Germany’s Siemens Energy in Canada due to sanctions.
The Caspian Pipeline Consortium (CPC), which carries about 1 percent of global oil, was ordered by a Russian court on Tuesday to suspend operations. The flows continue, but it’s unclear for how long.
“We know that the Europeans are trying to replace Russia’s energy resources,” Putin said. “However, we expect that the result of such actions will be an increase in spot gas prices and an increase in the cost of energy resources for end users.”
In recent months, Russia has cut gas flows to Bulgaria, Poland, Finland, Danish supplier Orsted, Dutch Gasterra and Shell from its German contracts, after all of them requested to switch to payments in rubles in response to European sanctions. turned down .
The Russian president said the West’s economic blitzkrieg had failed, but admitted damage had been done to the $1.8 trillion economy.
“We have to have faith in ourselves, but you have to see the risks – the risks are still there,” Putin said.
Putin said the situation in Russia’s fuel and energy sector remained stable, citing an increase in oil and gas condensate production to 10.7 barrels per day in June.
But he said Russian energy companies should prepare for an EU oil embargo to come into effect around the end of the year.
“The government is currently considering options to develop the railway and pipeline infrastructure to supply Russian oil and oil products to friendly countries,” Putin said.
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