News on the Russia-Ukraine conflict: As members of the European Union seek common ground to reduce the bloc’s reliance on Russia for energy, Russian President Vladimir Putin is looking for new markets to counter the impact of sanctions imposed by the West and others.
Russia is seeking alternate markets for its energy exports as a result of multiple sanctions, particularly in the energy industry. Putin’s ambition to control a 20% share of the worldwide LNG market by 2035 appears to be much more difficult to achieve now that the United Kingdom and the European Union have put further sanctions on Russia.
After Western capitals sanctioned Russia for its military action in Ukraine, Russian President Vladimir Putin indicated on Wednesday, April 14, that Moscow will look into alternate markets for its energy exports.
According to the US Energy Information Administration, Russia is now the top gas exporter, with Europe accounting for more than a third of its market. Russia has emerged as a critical supplier to Europe after the Netherlands decided to stop pumping oil and gas by 2050 and cut production last year. Last year, the Covid-19 outbreak and the resulting shutdown struck European and worldwide markets, giving Russia more power over Europe.
Following Putin’s statements about stepping in to “stabilize” the energy market, gas prices plummeted dramatically in October 2021, demonstrating Russia’s clout over the European market.
The West accused Vladimir Putin of attempting to gain geopolitical points in 2021 as a result of Russia’s growing influence in the European market, an accusation that the Kremlin has disputed, claiming that it just moved in to fill a hole in the gas market. After considerable thought, Russia offered to meet with Western leaders to discuss ways to increase gas supplies. He went on to blame Europe for the gas shortage, claiming that it was caused by a lack of preparedness.
Amid Europe’s gas crisis, Russia established a goal of gaining a 20% share of the market by 2035, increasing its annual LNG supply from roughly 30 million tons to 120 million-140 million tons.
The EU’s fifth set of sanctions against Russia, which restricted the transfer of commodities and technologies essential for gas liquefaction, thwarted this proposal. Experts estimate that this will throw Russia back many years as it tries to find out how to replace European technologies with Russian know-how.
Meanwhile, in response to Russia’s invasion of Ukraine and to offset its expanding market power, the EU aims to reduce its reliance on Russian gas by two-thirds this year. By 2027, the EU hopes to have eliminated all Russian fossil fuel imports.
According to research on Russia’s energy exports from 2021, Moscow sent 74 per cent of its natural gas to members of the Organization for Economic Cooperation and Development in Europe, and 13 per cent to Asia and Oceania and the rest of the globe.
After the United States and Saudi Arabia, Russia is the world’s third-largest oil production. The European Union began formulating plans to limit the import of oil as part of a new sanctions package against Russia as the third week of April began. Around a quarter of the EU’s crude imports come from Moscow.
Although the measures have not been completed, European Commission President Ursula von der Leyen stated that penalties might include increased tariffs on Russian oil and a ban on some oil goods.
While the United States and the United Kingdom have put a comprehensive embargo on Russian oil imports in the hopes of cutting off a major source of money for Moscow, Europe has a more difficult decision due to its substantial reliance, which might push up already high energy costs.
The EU’s geographical expanse and the drastically diverse economic powers of its 27 countries exacerbate the problem. While wealthier economies may be able to mitigate the effects of a Russian oil embargo, smaller economies such as Bulgaria and Hungary will be unable to do so since they are practically entirely reliant on Russian oil. Russia is also a major crude exporter to Belarus, Romania, and Bulgaria, according to the EIA.
In such a case, EU official Josep Borrell claimed that European countries were working individually to reduce their reliance on Russian oil. While sending additional arms to Ukraine, German Foreign Minister Annalena Baerbock called for a “coordinated strategy to phase out fossil fuels fully” in Russia. According to a poll in Germany, roughly 57 per cent of respondents believe Berlin must continue to import to prevent supply shortages and price increases.
Following the US and UK prohibitions, European penalties are likely to worry the Kremlin, since they might have a significant impact on Russia’s oil earnings, as over half of Russia’s oil exports go to OECD nations in Europe. The Asia Oceania area accounts for 38% of Russia’s oil exports, while the rest of the globe accounts for only 13%.
A prohibition on coal imports was included in the EU’s fifth package of measures against Russia. The Russian coal import restriction will go into force in mid-August. Russia is likely to lose USD 4.4 billion per year as a result of the decision, about half of what Europe buys from Moscow each year.
With Russia being the world’s sixth-largest coal producer and coal accounting for just 6% of the EU’s energy imports, the ban’s impact on the EU is likely to be mitigated in the coming months, with supplies scheduled from Australia, South Africa, and Indonesia.
However, Europe, which relies on Russia for 45 per cent of its coal imports, will face significant challenges, particularly in Germany’s steel industry. Germany, the EU’s largest economy, was left scrambling for gas and oil to maintain its industries shortly after the embargo was announced. According to reports, Germany, which is Russia’s largest coal importer, pressed the EU to delay the embargo by four months.
The delayed coal import restriction is being viewed as the most straightforward sanction against Russia. Beyond a few months, the fine is unlikely to have a significant impact on either party. While other coal suppliers such as the United States or India may meet Europe’s needs, Russia’s coal imports to Europe, which account for just 32% of the country’s total coal imports, are likely to be shifted to the Asia Oceania area, which presently purchases 53% of Moscow’s export quota.
Moscow’s grip over Europe is expected to be weakened if the EU restricts Russian oil and gas imports. However, Vladimir Putin’s remark that Russia is looking for alternate energy sources might be interpreted as an indication of Russia’s desire to have a large voice in the global market.
Edited By: Khushi Thakur
Published By: Bhavya Dedhia
