Russian President Vladimir Putin has threatened “catastrophic consequences” for world energy markets if Western powers impose further sanctions on Moscow, while G7 members discuss plans to try to curtail Russia’s oil revenues after its invasion of Ukraine.
The Russian president admitted that sanctions were undoubtedly hurting Russia’s economy, but said Western powers would do more damage to themselves as they grapple with rising inflation and the rising cost of living.
“All of this reveals once again that sanctions against Russia ultimately do much more harm to the countries they impose,” Putin told government members in a televised address on Friday.
“The continued use of sanctions could lead to even more dire consequences, even, without exaggeration, catastrophic consequences for the global energy market,” he said.
His comments will raise concerns that Russia could try to disrupt oil supplies if G7 members continue plans to try to limit the price Russia can receive for its crude oil, the main source of government revenue.
The oil industry fears that Russia could try to cut oil exports in retaliation if the G7 pushes through its plan. JPMorgan analysts have warned that the price of oil could rise to $380 a barrel if Moscow cut exports as “a way to hurt the West”.
Russia has already been accused by European officials of arming gas exports after it cut capacity on the Nord Stream 1 pipeline to Germany by 60 percent last month. The International Energy Agency has warned Europe to prepare for a complete shutdown of Russia’s gas supply this winter, with possible fuel rationing to industry and even homes.
Gas prices have nearly doubled in the past three weeks and on Friday Uniper, Germany’s largest buyer of Russian gas, requested a billion-euro bailout from Berlin, warning that supplies to Europe’s largest economy are under threat.
Households in the UK have been told to prepare for further sharp increases in energy bills this winter, with the price cap for household electricity and gas bills expected to rise to £3,400 a year for the average household, three times its level in 2020 .
Russia has already indicated its willingness to take action that could disrupt the oil supply. This week, a Russian court ordered a 30-day halt to loading oil exports at a Black Sea port that is a major channel for Kazakhstan’s exports. As oil flows continue, regional crude oil prices have risen sharply.
In Libya, General Khalifa Haftar, who enjoys Russian support in addition to Egypt’s support, has also stepped up a military campaign that has disrupted the country’s oil and gas exports in recent weeks.
“We’ve already seen Russia cut off gas flows to Europe and threaten oil exports from Kazakhstan,” said Amrita Sen of Energy Aspects analysts. “It would be foolish to rule out further Russian action if the west steps up sanctions.”
International oil prices have fallen in the past month as recession concerns overshadowed the threat to inventories, but remain above $100 a barrel, a level they hadn’t traded since 2014.
On Friday, Brent oil rose 1.2 percent to $106 a barrel.
Putin said Western countries were trying to convince other energy producers to increase production to keep prices down “but the energy market,” he said, “will not tolerate such commotion.”
US President Joe Biden will travel to Saudi Arabia next week, where requests for increased oil production from the Gulf states are expected to be on the table as part of wider discussions on security in the region.
Riyadh has accelerated planned production increases under an agreement with OPEC+ oil producers, but has stopped adding significant additional volumes to the market and warns that it does not have unlimited spare capacity.
Those familiar with the kingdom’s mindset say they are concerned that Russian production could plummet later this year as a result of Western sanctions.
Putin claimed the “economic blitzkrieg” attempted by Russian enemies had “clearly failed”, but admitted sanctions hit the economy.
He said Russian oil production has risen this year despite sanctions, by 3.5 percent since the start of the year, while gas production had fallen by 2 percent.