Russia’s military forces are advancing rapidly on the battlefield in Ukraine, dramatically increasing the stakes in this still-developing conflict. At the same time, the European Union (EU) is implementing its 19th round of sanctions against Moscow. Under the sanctions, Russian liquefied natural gas imports are banned. This action further increases the strain on the Russian economy, which is highly reliant on oil-and-gas-fueled revenues.
Though faced with increasing pressure from a coalition of international sanctions, Russia has shown zero willingness to accept a ceasefire soon. President Vladimir Putin has been unequivocal that Moscow’s demands for ending the war haven’t budged. He further dismissed the sanctions as an unfriendly act which wouldn’t have much of an effect on the depressed state of the Russian economy.
According to reports, Russia’s oil exports are key for bringing in that revenue. At the same time, India has emerged as the single biggest buyer of seaborne Russian crude. Indian refiners are prepared to make deep cuts to their crude purchases from Russia. If implemented, this step would threaten the long-term fundamental fiscal crisis for Moscow. India, our second most important customer, as well as other major customers, are reducing their demand. This steep drop ticket would deal a heavy blow to Russia’s oil revenues, which account for nearly a quarter of its national budget and are key to funding military operations in Ukraine.
No end to the conflict is in sight. Russian officials have repeatedly ruled out any ceasefire deal, claiming it would only stop the current violence before it is inevitably returned to. This position is further reinforced by threats from Russian leaders of dramatic reprisals for attacks far into Russian territory. Specifically, they have sought to ensure a “painful response” in the event that their assets are taken by adversarial nations.
U.S. sanctions have led Chinese state oil majors to temporarily suspend their purchases of Russian oil. This change would do much to compound the difficulties already being faced by Moscow. The city’s current plight of plummeting revenues amid the most economically insular era in modern history,
Putin, addressing the implications of the sanctions, remarked, “This is, of course, an attempt to put pressure on Russia.” He has downplayed throughout the process what global sanctions would do to the national economy. Through it all, he defiantly claims Russia’s place at the center of the global market.
The war in Ukraine has undoubtedly put energy security at the forefront of conversations across Europe and the EU. The recent EU sanctions provide a strong signal that this urgency is increasing — the need to become independent of Russian energy supplies. While European nations make plans to find alternatives to Russian gas and oil, the larger impact on global energy markets is still unclear.