Putin reeling as EU slashes Russian gas import by half
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It’s been almost six months since the Russian leader ordered troops into Ukraine, and many experts agree that Putin’s brutal war is being bankrolled by the billions in oil and gas revenues Moscow is earning from EU. The bloc is heavily dependent on Russian gas imports (accounting for 40 percent of its supply in 2021), and Putin has been exploiting that reliance by squeezing gas flows, which caused wholesale gas prices to soar.
While this control over energy reserves gives Russia the upper hand over the West, experts noted that the Kremlin could soon lose billions in revenue from both gas and oil, as the West is poised to impose a price cap on Russian oil within months.
Volodymyr Zelenskyy’s economic adviser Oleg Ustenko urged the EU to impose an international price cap on Russian oil imports and predicted that by the end of the year, such measures will be introduced.
Speaking to Politico, he said: “By the end of the year for sure, the issue is going to be solved.
“Russia is going to lose their oil revenues… my understanding is that we are very close to a final decision.”
He also predicted that the price cap would be likely half the current $80 (£67.65) per barrel that Russia receives.
EU rejecting Russian oil could be a major blow to Russia, as Europe imported nearly half of Russia’s crude and petroleum product exports before the invasion of Ukraine, according to the International Energy Agency (IEA).
Mr Ustenko also demanded that the West impose a price cap on Russian gas, however Politico noted that given Europe’s heavy dependence on natural gas imports, that proposal has so far been “a no-no”.
Despite this, experts like Amy Myers Jaffe, the managing director of the Climate Policy Lab, and Joe Webster of the Atlantic Council have argued that Russia could lose the long game when it comes to gas.
In a column for Politico they wrote: “Because while Russia is in a strong position in the short run, the long game for Russia’s state-controlled natural gas champion Gazprom is fraught.
“Unlike oil, which has more fungible transport, Gazprom is finding it hard to divert its Siberian gas elsewhere — and the numbers tell a clear story.”
Russia is set to export 16 bcm of gas per year to China through the Power of Siberia pipeline, with the figure rising to 38 bcm by 2025.
However, this pales in comparison to roughly 200 bcm that it would normally sell to Europe if they hadn’t invaded Ukraine.
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They noted that even in the most optimistic scenarios, Russia could only export about 128 bcm to China by 2030, still paling in comparison to Europe’s demands right now.
They continued: “In sum, between now and 2030, Gazprom has few options beyond Europe.
“On the flip side, its immediate vulnerability aside, Europe has now opened the possibility of zeroing out Russian imports by 2030, if not sooner.”
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