More Feverish Than Ever, Vladimir Putin Launches Extravagant Threats to the EU on Hydrocarbons.
Sanctioning the EU would mean that Putin would cut himself off from more than 30% of its foreign exchange earnings.
Nobody can guarantee what the outcome of the war in Ukraine will be. However, after more than six months of Putin's war in Ukraine, one thing is clear: the Russian army has still not achieved the initial goals set by Putin. Putin talked about demilitarizing Ukraine, and now Ukraine is more armed than ever thanks to the massive support of the West.
This massive American and European support is now allowing the Ukrainian army to regain ground on a Russian army that is more disorganized and demotivated than ever.
Putin's dreams of greatness already seem far away, as Russia is a pariah of the Western world and a vassal of China's boundless friend Xi Jinping. Russia's upcoming humiliating defeat in Ukraine is making Putin more and more feverish.
Adding to this is the fact that discontent is rising in Russia, with politicians now calling for impeachment for “high treason” for the Kremlin dictator.
On September 7, 2022, it is Putin more feverish than ever who announced that he would completely cut off the supply of gas and oil to the European Union if the latter did not lift its sanctions against Russia. Vladimir Putin is threatening European households and industrialists who cannot do without Russian gas. His strategy is always the same: to try to break the European cohesion which continues to support massively Ukraine.
But this retaliation would also be simply devastating for Vladimir Putin's country.
Last year, out of total exports of 489 billion dollars, nearly 178 billion came from oil, of which 104 billion were sold to European countries, and 54 billion from natural gas, to which was added 7 billion from LNG (Liquefied Natural Gas), of which 43 billion was destined for the Old Continent.
The calculation is quickly done: Putin threatens to deprive his country of an outlet providing a few months ago 30.1% of its foreign exchange earnings.
For oil, Moscow could redeploy its sales from Europe to other consumers. This is already happening. Except that the important importers of oil, apart from the Western countries, in the geopolitical sense of the term, which sanction Russia (European Union, Japan, Australia ...), are not legion. Turkey, India, China, and South Africa could buy more Russian oil, even if it means selling it discreetly if it exceeds their needs, but at the price of a significant discount, for logistical costs and reputational risk. It is said that this discount has reached 25 dollars a barrel in recent months. While black gold is now selling for less than just before the invasion, $85 a barrel of Brent compared to $90.
It is very difficult, however, to play this game with gas, where supplier and customer are in a way "married", for better or for worse, by a gas pipeline. However, Russia's gas transport infrastructure is massively oriented towards the West, Germany, Poland, Ukraine, or Turkey, via North Stream 1, Bratsvo, or TurkStream, which is logical since that is where its main customers are and its main deposits are in Western Siberia.
If the Kremlin wanted to switch its gas exports to other destinations, it would have little choice for logistical reasons; it would be to China, via the only major gas pipeline in service, Sila Siberia 1, or to India, again through China. The problem is that this pipeline, with a capacity of 63 billion cubic meters per year, could only transport about one-tenth of Russia's usual exports, and is already being used at almost full capacity.
That would leave the possibility of exporting LNG, but again in limited quantities given the available port infrastructure and refrigeration stations.
Why would the Kremlin be so “masochistic” as to deprive itself of a windfall that is largely impossible to replace in a few months? Perhaps because forcing Europe to let go of Ukraine is urgent, given the Russian army's setbacks in the face of Ukrainian counter-offensives in recent days.
One caveat, however: since foreign exchange earnings are used, above all, to finance the import of what a country considers it needs, a collapse of its exports would not necessarily be so dramatic for a Russia that no longer has the right to import much from Western countries, its usual suppliers.
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