Over the weekend, Russia temporarily blocked a gas pipeline to Europe. In response, the US and the West launched a trump card to consider Russia’s energy export ban.
This “tit-for-tat” is pushing the economic and sanctions war of the two sides to an unprecedented level. Oil price has touched nearly 140 USD/barrel in session on 7/3
Oil prices have hit a 13-year peak, at one point touching nearly $140 per barrel in the Asian market, before returning to around $130. Thus, since the war between Russia and Ukraine broke out, which is more than 10 days, the price of oil has increased by 30%.
Currently, Russia is supplying about 40% of the gas demand for the whole Europe, with 5 main pipelines.
On Thursday last week, the Russian side temporarily closed the valve of the Yamal – Europe gas pipeline exported to Germany. That means stopping about 15% of gas output to Europe. At the end of the day though, the activity was resumed. But what does this move mean?
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Workers inspect pipelines at a compressor station on the Yamal-Europe pipeline. (Photo: Reuters).
Lock the valve, the more scarce the oil, the higher the price, Russia earns more foreign currency. This can be understood as a way of raising capital indirectly by Russia, through the energy market rather than through the direct capital market, usually through the bond issuance channel, which is currently blocked on all sides from the United States and the United States. The West. It was estimated that the value of Russia’s natural gas exports to the EU was $220 million a day in February. This figure could double, to $545 million a day, if Russia closes gas pipelines. to Europe.
Experts also said that targeting Germany is mainly goal-oriented, in addition to gaining more negotiating leverage with the US. In response, just before the trip to Europe on the evening of March 6, US Secretary of State Antony Blinken issued a counterattack.
US Secretary of State Antony Blinken said: “We are currently in very active discussions with our European partners about banning Russian oil imports to our countries, while maintaining a stable oil supply across the world. Sanctions so far have had a huge impact on the Russian economy, the ruble continues to plummet and Russia is forecast to fall into a recession.
Difficult to find alternative energy sources in Russia
So in the worst-case scenario, Russia’s energy exports are cut off, is there another alternative source? It can be said that in the short term it is very difficult to find an alternative supply of both Russian gas and oil to Europe. As for gas products, there are European countries that are completely dependent on imports from Russia. Germany also imports more than 65%, Italy 43%, France also about 20%.
What about America? In fact, about 8% of the oil and refined products the US imported last year, or 672 thousand bpd, came from Russia. But now the price of gasoline in the US has increased to a record of nearly 14 years. Increasing shale oil production or opening strategic oil reserves were considered. But this solution is difficult in the medium term. Efforts to replace fuel supplies from Russia have become a challenging task these days.
Mr. Qian Jun, Fanhai School of International Finance, Fudan University, China: Shale gas has its own cost structure. Production is possible only if the market price exceeds a certain threshold. This condition has appeared, but it will take time for companies to increase production and export from the US to Europe.
Ms. Wang Dan, economist, Hang Seng Bank, China: We still have to face the fact that US gas and oil are generally more expensive and of lower quality than Russia’s. With the current level of conflict, people will be more interested in US shale oil and willing to accept high prices. However, in the long term, price will be the big deal.
Mr. Jamie Ingram, Senior Editor of Middle East Economic Survey: Qatar is exploiting at full capacity and cannot dig out a few million tons of gas to transport to Europe, but can only find a way to switch supply. from other markets. However, most of Qatar’s gas is supplying to Asia, where the pressure is also great.
Gas exports to Europe currently account for 50% of Russia’s total exports of this item. Last year reached about 220 billion USD. Therefore, if Russia blocks all 5 gas pipelines to Europe, this will be a huge economic loss for this country.
As for the US and the West, a comprehensive sanctions on Russia’s gas and oil sectors will also make it impossible for other supplies to meet. If prices continue to rise, it will be the people of the US and EU who will suffer.
This Thursday and Friday, the member states of the European Union will hold a Summit in France to discuss the urgent solution to offset the gas volume of European countries before the possibility that Russia can continue to supply gas. stop supplying gas through the Yamal gas pipeline at any time.
Speaking at a press conference, the President of the European Commission said that the European Union needs to diversify its energy supply and will invest massively in renewable energy development. This is a medium and long-term solution to deal with the possibility that Russia will completely cut off gas supplies to European countries.
In order to diversify energy supply, European countries have also been importing liquefied petroleum gas from many countries such as Australia, the US, and Qatar. In the short term, European countries that import 50-60% of their gas from Russia such as Germany, Austria, Hungary, Slovenia and Slovakia can make up the shortfall from European gas exporters such as Norway, Dutch, English or Danish.
In addition, European countries will also make efforts to soon complete the connection of the energy infrastructure of the Iberian peninsula with the rest of Europe, especially the MidCat pipeline project, which is being built halfway, for allowing Spain to supply gas imported from Algeria to France and other EU countries.
In parallel with the priorities of compensating for the lack of energy supply when Russia can stop supplying gas, European countries will also discuss and come up with solutions to support consumers and businesses to solve chemical problems. high energy mono.
According to the latest information, on March 8, the European Commission will make the first proposals to diversify supply for Europe, reducing dependence on Russia, especially liquefied petroleum gas.
Experts say that conducting sanctions is considered a zero-sum game. And in human history, an all-out economic war has often led to escalations far beyond initial calculations. Oil prices in the short term will be volatile, the parties will still talk to each other, but a comprehensive ban on each other’s energy sector is difficult to happen because the price is too expensive for both.
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