Image Source: CNN
A vital Russian gas pipeline will close for three days at the end of August, further decreasing supplies as European countries grapple with high energy prices.
Following the invasion of Ukraine in February, Western countries are attempting to reduce their imports of Russian oil and gas.
Last year, Russia supplied 40% of the EU’s natural gas. In 2020, Germany, Europe’s largest economy, was the top importer, followed by Italy. In 2021, the UK imported 4% of its needs from Russia, and it imported no Russian gas for the third month in a row.
The United States does not import any gas from Russia. They are, however, impacted when Russia restricts supplies to continental Europe, as this raises global gas costs.
Russian energy company Gazprom has announced that the Nord Stream 1 pipeline to Germany will be shut down for repairs from August 31 to September 2, causing significant disruptions to supply. It also burns an exceptionally large amount of gas from a plant near the beginning of the pipeline for unknown reasons.
What sanctions apply to Russian gas?
The EU says it will limit Russian gas imports by two-thirds within a year but stops short of a comprehensive embargo.
To help achieve its target, member countries have promised to reduce gas use by 15% over the next seven months.
However, there is uncertainty about where the EU would obtain alternative supplies, and it may be necessary to import liquefied natural gas (LNG) in tankers from sources such as the United States and Qatar.
However, energy consultant Kate Dourian claims, “In Europe, there aren’t nearly enough LNG terminals. So this will be very difficult for Germany.”
What has Russia done in response?
President Vladimir Putin has requested that “hostile” European states pay for gas in Russian roubles. This contributes to the value of Russia’s currency.
When Poland, Bulgaria, and Finland refused, Russia cut off their supply.
Several European energy corporations pay for gas using Russian bank accounts that convert euros into roubles. They maintain that the payments are in accordance with the penalty.
Will Europe’s oil supply run out?
By the end of this year, the EU has agreed to restrict all Russian oil imports by sea. However, it will permit oil to be transported via pipeline as a “temporary measure” because countries such as Hungary and Slovakia rely on it.
Read Also: Gas prices soar as Russia cuts German supply
The United States has imposed a blanket ban on Russian oil imports, and the volume of oil imports by the United Kingdom has dropped dramatically in the last year. In addition, the prohibition may cause certain European countries’ oil supplies to be strained.
According to the most recent figures available, Lithuania and Finland received almost 80% of their oil from Russia in November of last year. However, EU member states can purchase oil from other producers.
The International Energy Agency (IEA), a consortium of oil-importing countries, has released 120 million barrels of petroleum from its holdings, and President Biden has ordered a large release of oil from America’s reserves.
“Nations such as Saudi Arabia may start putting more oil on the global market later this year, and there may be greater supply from the United States,” says Kate Dourian.
Will sanctions be effective?
Russia collected an estimated €400 billion ($430 billion, £341 billion) in oil and gas exports to Europe over the last year, aided by rising energy prices.
According to the EU, the latest sanctions could reduce the amount of oil purchased from Russia by 90%. However, this will take months to fully implement, and even then, Russia will be able to sell oil to other countries.
Because the price of Russian crude has fallen in recent months, India and China have both purchased more of it.