The West’s united response to Russia’s invasion of Ukraine is splintering over whether European countries are willing to take a severe economic hit and stop buying the oil that fuels the Kremlin’s war effort.
While the U.S. is set to impose a crude oil ban, it looks increasingly unlikely that its European allies will agree to sanction President Vladimir Putin’s energy exports because of fears about runaway inflation and retaliation from the Russians.
Sensing a danger to this vital component of its budget, Moscow is issuing a blend of dire warnings and outright threats to its neighbors. Russian Deputy Prime Minister Alexander Novak warned Monday that any restrictions on Russian crude could send oil prices spiraling above $300 per barrel, from about $130 now.
Novak also threatened to retaliate against Western measures by cutting off the gas flow to Germany along the first Nord Stream pipeline. That would be a massive hammer-blow to German supply — out of the 93 billion cubic meters that Germany consumed in 2021, 60 bcm came via Nord Stream.
In a probable allusion to China, Novak said that Russia would simply shift its sales elsewhere if it faced Western sanctions. “If you want to cut off supplies of energy resources from Russia, go ahead, we are ready for that. We know where will reroute these volumes. The question is: Who benefits? And what is the point?”
That sort of calculus now seems to be looming large in Europe. And the Europeans are shying away from a fight if it hurts their bottom line. [Continue reading…]
The United States imports a small share of Russia’s oil exports and doesn’t buy any of its natural gas.
Last year, roughly 8% of U.S. imports of oil and petroleum products came from Russia. Together, the imports totaled the equivalent of 245 million barrels in 2021, which was roughly 672,000 barrels of oil and petroleum products a day. But imports of Russian oil have been declining rapidly as buyers shunned the fuel.
Because the amount of oil the U.S. imports from Russia is modest, Russia could potentially sell that oil elsewhere, perhaps in China or India. Still, it would probably have to sell it at a steep discount, because fewer and fewer buyers are accepting Russian oil.
If Russia were eventually shut off from the global market, rogue countries such as Iran and Venezuela might be “welcomed back” as sources of oil, said Claudio Galimberti, senior vice president of analysis at Rystad Energy. Such additional sources could, in turn, potentially stabilize prices. [Continue reading…]