Europe could start to sanction Russian energy supplies, energy historian Daniel Yergin has told Bloomberg Television on Thursday.
"I think we're going to start to see sanctions," Yergin said.
The EU has been seriously mulling sanctions on Russian energy supply since the EU condemned the killing of unarmed civilians in Bucha by Russian forces while retreating from Ukrainian towns.
While the EU has managed to sanction coal and has committed to weaning itself off Russian oil by the end of the year, the EU cannot so easily disentangle itself from Russian natural gas, and such a feat would likely be measured in years.
Europe collectively depends on Russian natural gas for around one-third of its total demand. It depends on Russia's crude oil for one-fourth of its demand. Europe has refrained from directly targeting Russian energy exports, fearing that sanctions or an embargo could lead to a deep recession in the major European economies, including the biggest one, Germany. Germany depends on Russia for half of its gas supplies.
Pressure has been mounting on Russian energy buyers since Russia invaded Ukraine, and on Monday, the EU was said to be working on proposals for an EU oil embargo on Russia.
Russian President Vladimir Putin on Thursday said that Europe doesn't have a viable immediate replacement for Russia's natural gas, and that attempting to do so would have a huge negative effect on European economies.
Leaders of EU member states were thought to be set to discuss at the end of May at a summit the possibility of jointly buying natural gas to keep from competing with each other for non-Russian gas supplies.
The European Commission presented a plan in early March to cut EU demand for Russian gas by two-thirds before the end of 2022 and completely by 2030. The plan, REPowerEU, will seek to diversify gas supplies, speed up the roll-out of renewable gases and replace gas in heating and power generation.
The Commission "is working at full speed to phase out Russian fossil fuels," under the plan unveiled earlier in March, following Russia's invasion of Ukraine, Valdis Dombrovskis, Executive Vice-President of the European Commission, said at the end of March.
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By Julianne Geiger for Oilprice.com
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The entire LNG exports of the United States, Qatar and Australia and also Norway’s piped gas exports would barely replace Russian gas and LNG supplies partly because of long-term contractual arrangements with customers in the Asia-Pacific region and also because LNG fetches higher prices in Asia because of much stronger demand and bigger market.
And while the EU might be able to sanction Russian oil supplies over time, it will be forced to pay highly exorbitant prices in a tight market like the one we have currently. This will add a huge financial burden on its economy and plunge it into recession.
A big chunk of Russian oil and gas exports continues to go to China. Another sizeable chunk is going to India and a few other countries and the remainder is being bought overtly and covertly by Asian and Western oil and gas traders. And even, if Russia sells smaller volumes of oil and gas, its revenue isn’t being affected because of rising oil and gas prices. In fact, Russia’s budget surplus is getting bigger and bigger.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London