Putin Threatens Retaliation Against Western Oil Companies

Russian President Vladimir Putin has responded to U.S. and EU sanctions by warning that further action against Russia could force him to reconsider the involvement of western oil companies in his country.

If the West issues another round of sanctions, "then of course we will have to consider who's working and how in the Russian Federation, in the key sectors of the Russian economy, including energy," Putin told reporters in Belarus on April 29. "We really don't want to take these reciprocal steps."

The not-so-veiled threat increased uncertainty for the billion dollar investments held by several major oil companies, including ExxonMobil, BP and Royal Dutch Shell. The companies are already growing concerned about how U.S. sanctions will affect their positions after Rosneft's Igor Sechin was included on the U.S. target list.

The Russian economy is already feeling some pain from U.S. and EU sanctions. The Micex Index is down more than 13 percent so far this year and the Russian ruble has lost 8 percent of its value, the second worst emerging-market performance in the world.

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Western leaders are already considering the next round of sanctions, which could target broader sectors of the Russian economy. A spokesperson for EU Foreign Affairs Representative Catherine Ashton said that preparations of these more serious sanctions were "very advanced."

The steady ratcheting up of tensions shows no signs of easing. As of April 30, Acting Ukrainian President Oleksandr V. Turchynov said that Ukrainian forces were "helpless" to control the eastern part of the country, which has largely been overrun by pro-Russian forces. Turchynov put the military on full combat readiness on the threat of a Russian invasion.

Meanwhile, Russian gas giant Gazprom said on April 29 that the worsening tensions could disrupt gas supplies to Europe. "Political and economic tensions between Russia and Ukraine have caused renewed concerns regarding the reliability of gas supplies to Europe through Ukraine," the company wrote in a management report. "Any disputes with Ukraine could potentially lead to a disruption of the Gazprom Group's exports to Europe through pipelines crossing Ukraine."

By Charles Kennedy of OIlprice.com