Russia stops gas exports to Europe: What happens now?
The onset of winter in Europe is a fascinating time. Snow on the sidewalks blankets cities and the countryside turns into a sugar-faced paradise. Smores are baked. Hot chocolates are served. Plummeting temperatures make wild animals descend from their hideouts in the mountains and provide rare sightings. But most importantly, winter is the time of Christmas, and the absolute jubilation of stockings, gifts, music, and merriment.
Although, this winter, families in Europe are bracing for what can be a calamitous period of time. Due to the war in Ukraine, members of the European Union were forced to impose sanctions on Russian businesses and oligarchs. Recently, Gazprom, the Russian state-owned gas company, has halted gas supplies to Europe citing maintenance issues. The company claims that they have found a leak in the Nord Stream 1, a pipeline that runs from Russia to Germany. Russia import and export data makes for an interesting read at this point in time.
Russia has claimed that the leak could’ve been solved speedily if Europe hadn’t placed sanctions on Russian-owned businesses. And, that the pipeline could be closed indefinitely. Global energy and policy experts claim that Russia is indulging in an arm-twisting exercise to undermine western sanctions.
The tussle has already resulted in Europe facing sky-high inflation and eroding living standards. If the standoff extends through to the winter, European families could face power cuts and a loss of heating in the coldest months of the year. Get a complete reading of oil and gas exports in this dataset by The Trade Vision.
Are sanctions even working?
Sanctions imposed by the west were initially aimed at depleting Russian foreign reserves. But poor targeting has resulted in Europe facing a cost of living crisis, while the Russian government basks in fuel revenues. The increase in global oil prices has enabled the Russian government to stave off fears of a national banking crisis.
Conversely, countries that previously exported goods to Russia and Ukraine, have tonnes of products in store, but no buyers. The Trade Vision has previously reported how Ecuadorian bananas, previously headed for Russia, are rotting on its shores. Considered in its totality, sanctions have failed to dent the Russian offensive, and a course correction might be mandated by the current pause in gas exports.
Who’s still buying Russian oil?
No other commodity in the global trade scenario is as highly-demanded as oil and natural gas. Markets tend to mimic oil rates and countries find it difficult to obtain alternative sources in times of peril. This is the case in Russia as well. It has been reported that Russia will earn more than $300 billion in energy exports this year alone. The revenues will facilitate Russia in keeping the war alive and maintaining its fiscal security. Even after Europe shifts its energy demand elsewhere, Russia will be able to sell its oil to other countries. India and China have recently started to buy more crude oil from Russia, owing to lower prices.
These are the countries that received most Russian energy exports within the first 100 days of the war.
1. China ($13.2 billion)
2. Germany ($12.7 billion)
3. Italy ($8.2 billion)
4. Netherlands ($8.2 billion)
5. Turkey ($7 billion)
What will Europe do now?
A combination of measures including demand reduction and alternative sourcing will help Europe shore up reserves before the winter. Germany is already turning to countries in the gulf and Eastern Europe to buy natural gas. Though, the real burden lies in the reduction of demand. That includes demand from households and industries alike. The economic repercussions of such reduction are yet to be measured.
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