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Russia sanctions: How can the world cope without its oil and gas? Russia sanctions: How can the world cope without its oil and gas?
(about 2 months later)
A key Russian gas pipeline to Europe has been closed indefinitely because of leaks, meaning gas supplies to the continent will remain tight heading into winter. Since Russia's invasion of Ukraine, many countries have pledged to end or severely cut back their oil and gas imports.
Nord Stream 1, an underwater pipeline running across the Baltic Sea to Germany, had been supplying EU states with 35% of all the gas they imported from Russia. The Russian economy is highly dependent on its lucrative energy sector and these measures are intended to curtail Moscow's revenues and hinder its war effort.
EU leaders suspect the leaks were created deliberately, but have stopped short of blaming Russia for them. What sanctions are in place?
How did the leaks occur? EU nations have ended imports of Russian oil brought in by sea, with a ban on refined oil products from February next year. The United States has also stopped all imports of Russian oil. The UK has pledged to phase out all Russian oil imports by the end of this year.
Operators noticed leaks in Nord Stream 1 in a stretch of pipe near the Island of Bornholm in the Baltic Sea. There were also leaks in a parallel pipeline called Nord Stream 2, which is not yet in use. An oil price cap approved by Western allies aims to stop countries paying more than $60 (£48) for a barrel of Russian crude oil.
Seismologists in Denmark said there had been explosions under the sea in the same area as the leaks occurred. Russia's gas sector has also been targeted. The EU said in March it would cut gas imports from Russia by two-thirds within a year. Last year, the UK only imported small quantities of Russian gas and it has now ended this altogether.
President of the European Commission Ursula von der Leyen says the pipelines were probably sabotaged, but did not say who might be to blame.
Russia has denied responsibility.
How much could Nord Stream 1's closure affect Europe?
Last year, Russia was supplying EU countries with 40% of their natural gas.
Germany, Europe's largest economy, was the largest importer in 2021, followed by Italy.
However, Russia has been steadily reducing supplies.
Over the summer, it drastically cut the amount of gas it supplied through Nord Stream 1, from 170m cubic metres a day to 20m cubic metres.
It frequently shut the pipeline, citing maintenance work or equipment problems.
Overall, Russia has cut it supplies of gas to Europe by 88% over the past year, according to David Fyfe, chief economist with research firm Argus Media.
This has caused the wholesale price of gas to increase by 210% over the same period.
In 2021, the UK imported 4% of its needs from Russia. Nowadays, it imports none.
However, gas prices have also soared in Britain because when Russia restricts supplies to mainland Europe, that also creates acute shortages on the international gas market.
How can Europe respond to the gas shortage?
Gazprom, the Russian state-backed firm which operates Nord Stream 1, says it is "impossible" to say when it could come back online.
"Russia has created gas shortages as a way of weakening Europe's determination to maintain sanctions against it," says Mr Fyfe.
"This puts further leverage on the Europeans."
Europe has become increasingly dependent on supplies of Russian gasEurope has become increasingly dependent on supplies of Russian gas
However, the European Union has said it will cut gas imports from Russia by two-thirds over the coming year. Who is still buying Russia's oil?
To help it reach that goal, member states have agreed to cut gas usage by 15% over the next seven months. In 2021, more than half of all Russia's crude oil exports went to countries in Europe.
EU states are also looking to ship in liquefied natural gas (LNG) in tankers from producers such as the US and Qatar. This year, many of these countries have sought to cut back their Russian oil purchases.
However, says energy advisor Kate Dourian: "there aren't enough LNG terminals in Europe. This will be a problem for Germany, particularly." UK imports of oil from Russia have fallen sharply in the last year. Other European countries have cut back too.
What sanctions are being imposed on Russian oil and gas? Some, however, have remained heavily reliant. Figures for September 2022 show that Slovakia and Hungary top that list.
Russia exports about 5m barrels a day of crude oil and about 3m barrels a day of refined oil products. These account for 40% of its total export revenues. So European countries have been looking elsewhere for their supplies.
EU nations will stop buying Russian crude oil imported by sea from 5 December, and end purchases of Russian refined oil products by sea from 5 February next year. Persuading other oil rich nations such as Saudi Arabia, the United Arab Emirates (UAE) and Venezuela to increase production has so far been unsuccessful, as they have either remained neutral or backed Russia over the conflict with Ukraine.
Some landlocked European countries such as Hungary and Slovakia will get an opt-out because they have no other way of importing oil except via pipeline from Russia. Earlier this year, the International Energy Agency (IEA) - a club of oil importing countries - agreed to release 120m barrels of crude from their stocks. The US also released some of its own strategic reserves.
The UK and US have already banned imports of Russian oil. Ending Russian gas dependence is harder
The EU also wants to put a cap on the price which other nations will pay for Russian oil, to stop Russia from making big profits. Reducing gas imports from Russia has been a major challenge for many European countries.
The precise level of the cap will be decided later, but will affect big importers of Russian oil such as India. The continent has been getting most of its gas through pipelines, the majority of which run through Russia.
The plan is being backed by G7 nations such as the US and the UK. Those that don't, such as a pipeline which runs from Azerbaijan and into Turkey, haven't got enough capacity to fulfil Europe's needs.
The EU and G7 say those which don't obey the cap will not be able to use firms in financial centres like London to insure oil shipments. Last year, Russia was supplying EU countries with 40% of their natural gas, with Germany the largest importer, followed by Italy and the Netherlands.
President Putin has threatened to cut all energy supplies if it takes such a step, but G7 leaders believe that's a bluff. The UK has not been a major buyer of Russian gas - in 2021, just 4% of its supply came from there. It now now imports none.
Will this leave Europe short of oil? Switching to liquefied gas by sea
Some European nations could still have their oil supplies significantly squeezed by the ban. EU states are increasingly looking to ship in liquefied natural gas (LNG) in tankers from producers such as the US and Qatar.
Lithuania and Finland imported about 80% of their oil from Russia in November last year. The shift towards LNG imports by European countries has been very significant, replacing supplies from Russia which had dominated European purchases over the past few years.
How can the world cope without Russian oil and gas? However, "there aren't enough LNG terminals in Europe", says energy advisor Kate Dourian. "This will be a problem for Germany, particularly,"
How can the world cope without Russian oil and gas? There several new LNG terminals planned and some already under construction across Europe as countries try to boost their capacity.
However, EU countries can buy oil from other producers. New destinations for Russia's oil and gas
Earlier this year, the IEA - a club of oil importing countries - agreed to release 120m barrels-worth of crude from their stocks, and President Biden ordered a major release of oil from America's reserves. India, China and Turkey have all ramped up their purchases of Russian oil - and together they now make up 70% of total Russian crude flows by sea.
The US has declared a complete ban on Russian oil imports, and the volume of oil imports by the UK has fallen sharply in the last year. This pivot to new markets has been driven by Russia offering its oil at a significantly lower price than the global benchmark Brent crude. In mid December the discount on Urals crude was just under $30 a barrel.
Are sanctions working? India started the year buying less than 2% of its oil from Russia. It's now on course to become India's largest single supplier.
Helped by soaring energy prices, Russia received an estimated €400bn ($430bn, £341bn) over the past year from oil and gas exports to Europe. China's imports of oil have also risen sharply in recent months, up more than 20% in the year to September 2022.
David Fyfe of Argus Media says that high global prices of oil have pushed up the amount Russia earns from crude oil exports by 41%. India is taking advantage of cheaper oil imported from Russia
The EU says its latest sanctions could cut the amount of oil it buys from Russia by 90%. However, this will take months to come into full effect, and even then Russia will be able to sell oil elsewhere in the world. Financial sanctions have had an impact
India and China have both been buying more Russian crude in recent months. Various measures have been adopted by Western nations in an attempt to make international trade with Russia more difficult.
Major Russian banks have been removed from the international financial messaging system Swift, which has made payments to Russia for its oil and gas exports harder.
Those countries continuing to trade with Russia have sought ways around this. Both China and India are increasingly making their oil and gas purchases in their own local currencies, the renminbi and the rupee.
Clarification 21 October: A previous version of this story contained a graphic with the title: 'The UK has much less gas storage than some other European countries'. The aim was to show how much gas the UK had in storage at that time. It was not intended to show the UK's total capacity for gas storage.Clarification 21 October: A previous version of this story contained a graphic with the title: 'The UK has much less gas storage than some other European countries'. The aim was to show how much gas the UK had in storage at that time. It was not intended to show the UK's total capacity for gas storage.
How can the world cope without Russian oil and gas?How can the world cope without Russian oil and gas?
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