Sanctions on Russian oil and gas will hammer global market, Novak says

An Aavaz protest campaign against Russian oil in Brussels, Belgium, on March 22, 2022. PHOTO: EPA-EFE

MOSCOW (REUTERS) - Russian Deputy Prime Minister Alexander Novak said on Wednesday (March 23) global energy markets would collapse if sanctions were imposed on oil and gas from Russia, a major exporter of hydrocarbons.

The European Union, which relies heavily on Russian energy, has been considering expanding sanctions on Moscow imposed over the Ukraine crisis to include hydrocarbons. EU foreign ministers disagreed on Monday about whether to proceed.

The United States and Britain, both far less reliant on Russian fuel, have taken steps to ban Russian oil imports.

"Russia is the largest supplier, the share of Russian energy resources on global markets stands at around 40 per cent. Obviously, oil and gas markets would collapse without Russian hydrocarbons in the event that sanctions were imposed," Novak said.

He told Russia's lower house of parliament that there was a shortage of crude in global markets of about 1 million barrels per day (bpd).

The EU, which launched a new wave of sanctions last week, has banned investments in Russia's energy sector.

Novak said Europe could face a shortage of diesel, with inventories now at the lowest since 2008.

He also said a ban on the Russia-led Nord Stream 2 gas pipeline to Germany showed a failure to understand the energy market balance and would fuel inflation.

Germany halted the Nord Stream 2 gas pipeline project, which was designed to double the flow of Russian gas heading direct to Germany, after Russia formally recognised two breakaway regions in eastern Ukraine.

The benchmark Dutch front-month gas contract hub hit a record intra-day high of €335 (S$500) per megawatt hour this month amid the conflict in Ukraine, which is also a transit point for gas to Europe. It now trades at €103.

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