The CEO of Russia’s energy giant Gazprom has warned that energy supplies will be halted if Europe imposes price caps on Russian natural gas exports.
“Such a one-sided decision is of course a violation of existing contracts, which would lead to a termination of supplies,” Gazprom CEO Alexei Miller said on Russian TV on Sunday, Reuters
reported.Miller’s comments come as the Group of Seven (G-7) and the European Union are attempting to cap the prices of Russian oil as part of an eighth package of sanctions against the Kremlin over its invasion of Ukraine.
They hope that the move will limit the Kremlin’s earnings and prevent it from financing its war in Ukraine while simultaneously keeping global energy markets stable via continued supplies.
Russia made 158 billion euros ($154 billion) in revenue from fossil fuel exports in the first six months of the war, from Feb. 24 to Aug. 24, according to a report
(pdf) from the Centre for Research on Energy and Clean Air, which tracks Russia’s exports. The EU was the largest buyer, importing 54 percent of this, worth approximately 85 billion euros ($82 billion), according to the report.
The latest round of sanctions from the EU was announced earlier this month by European Commission President Ursula von der Leyen in light of Russian President Vladimir Putin’s annexing of large swaths of Ukrainian territory and his threats regarding the use of nuclear weapons.
EU Officials Yet to Reach Agreement on Price Cap
Under those sanctions, a price cap on Russian crude oil would go into effect on Dec. 5 and a price cap on refined petroleum products would begin on Feb. 5, 2023.Once the price cap is implemented, it will allow European operators to undertake and support the transport of Russian oil to other countries, provided the price for that energy remains under a pre-set “cap,” according to a
statement from the European Commission.
“It will thus also help address inflation and keep energy costs stable at a time when high costs – particularly elevated fuel prices – are a great concern to all Europeans,” the statement adds.
However, EU officials have not yet reached an agreement on the price cap and some countries such as Germany, Europe’s biggest gas market, have raised concerns over the move which they believe may trigger a complete cut-off from Moscow.
Putin last month threatened to cut off energy supplies if price caps were imposed.
“We will not supply anything at all if it contradicts our interests,” Putin
said at an economic forum in Vladivostok in September. “We will not supply gas, oil, coal, heating oil—we will not supply anything,” he added.
The plan to cap the price of Russian oil exports could yield $160 billion in annual savings for the 50 largest emerging markets, according to U.S. Treasury estimates reported by the
Financial Times.
However, a cut to Russian supplies could also leave countries paying even higher energy prices and create global turmoil in the energy markets.
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