Russian President Vladimir Putin has threatened with “catastrophic consequences” for world energy markets if the Western powers impose new sanctions in Moscow, while G7 members discuss plans to try to cap the oil income from Russia after his invasion of Ukraine.
The Russian president admitted that the sanctions were undoubtedly hurting the Russian economy, but said Western powers risked inflicting more harm on themselves as they battle rising inflation and the growing crisis in the world economy. Cost of life.
“All of this reveals, once again, that sanctions against Russia end up doing much more harm to the countries that impose them,” Putin told government officials in a televised address on Friday.
“The increased use of sanctions could have even more serious consequences, even, without exaggeration, catastrophic consequences on the global energy market,” he said.
His comments will increase concerns about the fact that Russia could seek to disrupt the oil supply if the G7 members go ahead with plans aimed at capping the price that Russia can receive for its crude, the main source government revenue.
The oil industry fears that Russia will seek to cut its oil exports in retaliation if the G7 goes ahead with its plan. JPMorgan analysts have warned that oil prices could soar as high as $380 a barrel if Moscow cuts exports as “a way to inflict pain on the West”.
Russia has previously been accused by European officials of militarizing gas exports after cutting capacity on the Nord Stream 1 gas pipeline to Germany by 60% last month. The International Energy Agency has warned Europe to prepare for a complete cut in Russian gas supplies this winter, with possible fuel rationing for industry and even homes.
Gas prices have nearly doubled in the past three weeks and on Friday Uniper, Germany’s biggest buyer of Russian gas, called for a multibillion-euro bailout from Berlin, warning that supply to the biggest economy of Europe was threatened.
UK households have been told to brace for further steep rises in their energy bills this winter, with the national electricity and gas bill price cap set to climb to £3,400 a year for the average household, or three times the 2020 level.
Russia has already signaled its willingness to take measures that could disrupt oil supplies. This week, a Russian court ordered a 30-day halt to oil export shipments at a Black Sea port that is a key conduit for exports from Kazakhstan. As oil flows continued, prices for regional grades of crude surged.
In Libya, General Khalifa Haftar, who enjoys Russian backing and backing from Egypt, has also stepped up a military campaign that has disrupted the country’s oil and gas exports in recent weeks.
“We have already seen Russia cut off gas flows to Europe and threaten Kazakhstan’s oil exports,” said Amrita Sen of Energy Aspects analysts. “It would be foolish to rule out further Russian action if the West increases sanctions. »
International oil prices dropped in last month, concerns about a recession that has overshadowed the threat to supplies, but remain over 100 dollars per barrel, a level at which they had not exchanged since 2014 .
On Friday, Brent was up 1.2% at $106 a barrel.
Putin said Western countries were trying to convince other energy producers to increase production in order to keep prices low “but the energy market”, he said, “does not tolerate a such a fuss”.
US President Joe Biden is due to visit Saudi Arabia next week, where demands for increased oil production from Gulf states are expected to be on the table as part of broader security talks in the region.
Riyadh accelerated production increases planned under an agreement between OPEC+ oil producers, but refrained from adding large additional volumes to the market, warning that it does not have unlimited spare capacity.
People familiar with the kingdom’s thinking say they are concerned that Russian production will plummet later this year under Western sanctions.
Putin claimed the “economic blitzkrieg” attempted by Russia’s enemies had “obviously failed”, but admitted the sanctions were hitting the economy.
He said Russian oil production had increased this year despite sanctions, rising 3.5% since the start of the year, while gas production had fallen 2%.