The Russian energy sector, crucial for funding the war in Ukraine, faces mounting pressure from US-led sanctions and reluctance from key trading partners like China and India to accept Russian oil. Gazprom, Russia's largest gas company, is also grappling with declining revenues and proposed staff cuts.
Russia's energy sector , the nation's primary revenue source, has been dealt a series of blows recently, impacting exports crucial for funding Vladimir Putin's war in Ukraine. U.S.-led sanctions on Russian oil have been compounded by critical trading partners China and India rejecting shipments of the commodity.
Berlin-based energy analyst Tom O'Donnell told Newsweek that these latest sanctions could significantly harm Moscow, and targeting Russian oil could be a potent weapon for incoming President Donald Trump to wield against Putin. Adding to Russia's energy woes, Moscow has accused Ukraine of attempting a drone attack against the country's last major gas pipeline into Europe. Declining natural gas revenues have preceded energy giant Gazprom proposing drastic staff reductions. Newsweek has reached out to the Kremlin and Gazprom for comment. Why this matters: Russia's energy sector is the lifeblood of the country's economy, and exports of natural gas and oil are essential for Putin to finance his military ambitions, which are projected to consume a third of the government budget in 2025. Sanctions on these commodities could severely hinder the Russian leader's ability to sustain the war effort. What to know: Days before President Joe Biden's departure from the White House, the U.S. announced its most stringent sanctions yet on Russia's energy sector on January 10. This included a joint commitment with the U.K. to block oil producers Gazprom Neft and Surgutneftegas and to sanction vessels belonging to a 'shadow fleet' that Russia has been using to circumvent a $60 price cap. The U.S. also took steps to block two active liquefied natural gas (LNG) projects, a large Russian oil project, and third-country entities supporting Russia's energy exports.Oil to China and India in Question: China and India have significantly increased their imports of Russian oil, but this deepening trade relationship is facing strain. Reports indicate that both countries are increasingly hesitant about accepting the commodity that is vital to the Kremlin's coffers. Within days, vessels allegedly part of Russia's shadow fleet carrying Eastern Siberia-Pacific Ocean (ESPO) crude oil from Kozmino port in Russia were rerouted from their planned ports in China, Bloomberg reported. The Huihai Pacific, which was scheduled to arrive at Dongjiakou in Shandong province, changed course and is currently anchored offshore, laden with oil. Two other tankers, Mermar and Olia, were destined for Yantai but are currently docked in the Yellow Sea, the news outlet said. Citing an unnamed Indian official, Bloomberg reported Monday that India would not allow tankers sanctioned by the U.S. to discharge, excluding vessels chartered before the sanctions were announced, provided they unload by March 12. O'Donnell told Newsweek that the stranded vessels demonstrated that last week's sanctions would be more effective than the price cap on oil, especially as Russian oil exports were already dwindling due to OPEC+ quotas and an oversupplied market. O'Donnell added that, if Donald Trump truly wants to exert significant pressure on Putin to secure a peace deal to end the war, he could sanction the export of oil products from Russia.Gazprom Problems: Two weeks after a gas transit deal between Russia and Ukraine expired, Russia's Defense Ministry accused Kyiv of launching drones at a gas compressor station that forms the TurkStream pipeline. Ukraine has not commented on this allegation, and gas giant Gazprom stated that the facility is operating normally and that supplies through the pipeline were not disrupted. However, the Russian natural gas firm has also proposed reducing its staff numbers from 4,100 to 2,500 as it faces dwindling revenues and production that will be further hampered by the latest U.S. and U.K. sanctions, which also target shipborne LNG. What People Are Saying: Energy analyst Tom O'Donnell told Newsweek: 'New sanctions that have been imposed on Russia seem quite significant.' If Donald Trump really wants to inflict substantial damage on Russia as part of his effort to secure a deal with Putin, he can simply sanction the export of oil products from Russia, particularly from Russia's westward export terminals. This could be devastating to Russian exports and Russian export revenues.'What Happens Next: Expectations that U.S. sanctions on Russian oil would compel buyers in India and China to seek alternative suppliers caused prices to surge to a four-month high on Monday, Reuters reported. China's state oil companies and large private refiners are also turning to crude cargoes from the Middle East and elsewhere, accelerating preparations for potential disruptions in fuel supply, Bloomberg reported. The reported job cuts at Gazprom and the losses it has incurred point to further difficulties for the gas giant in finding new markets for its fuel.
RUSSIA ENERGY SECTOR SANCTIONS OIL GAS WAR IN UKRAINE GAZPROM CHINA INDIA POLITICS
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