Putin cuts off gas to Europe in energy war
Russian pipeline decision comes after G7 moves to curb Kremlin’s oil profits over its assault on Ukraine
VLADIMIR PUTIN has imposed an indefinite shutdown of the Nord Stream pipeline supplying gas to Europe, as a proxy energy war between the Kremlin and the West escalates.
State gas giant Gazprom said late yesterday the Nord Stream 1 gas pipeline to Germany would not reopen following maintenance as planned, despite market data earlier suggesting flows would restart today.
Gazprom blamed an oil leak for the delay but gave no timeline for reopening. Russia has been accused of weaponising gas supplies in retaliation over sanctions, pushing Europe into a cost of living crisis and raising rationing fears.
News that flows would not restart came hours after the G7 confirmed plans for a price cap on Russian oil in an effort to cripple the Kremlin over its war on Ukraine.
The club of industrial powers, which includes the US and the UK, said they would “continue to stand with Ukraine for as long as it takes” as they unveiled the measure after talks in Washington.
Nadhim Zahawi, the Chancellor, said the G7 was “united against [Russia’s] barbaric aggression, adding he will “do all we can to support Ukraine.”
Moscow hit back, saying it would halt oil sales to countries imposing the cap, which it argued would destabilise global oil markets.
“We simply will not cooperate with them on non-market principles,” Kremlin spokesman Dmitry Peskov said.
Under the oil price cap measures, Western-dominated services such as insurance and finance for shipping will only be allowed if the Russian oil cargoes are purchased at or below a certain price level. The level of the cap has not yet been set and will be determined later based on “technical inputs” decided by the countries involved.
Christian Lindner, Germany’s finance minister who chaired the G7 meeting, said the move would curb Russia’s revenues while also reducing inflation.
Russia is the world’s second largest exporter of crude oil behind Saudi Arabia and, as of February just before its war, was the world’s largest exporter of
‘The G7 will continue to stand with Ukraine for as long as it takes’
oil to global markets. Brent crude surged following the invasion, peaking at more than $127 per barrel in March. It has fallen back to around $94 per barrel, higher than pre-crisis levels.
The International Energy Agency said last month that sanctions imposed so far had only had a “limited impact” on Russian production, with rising demand from countries such as India, China and Turkey offsetting falls elsewhere.
A UK ban on Russian oil imports does not come into force until the end of the year amid fears over disruption to diesel supplies in particular.
Among other G7 countries, the US has banned Russian oil imports, while the EU is planning to ban seaborne Russian oil imports by the end of the year.
Ministers are aiming to have the price cap in place in time for the EU import ban, with details still being finalised.
The price of Brent rose slightly yesterday as traders anticipated potential production cuts as recession fears loom.
It came as the deputy chairman of Russia’s central bank admitted Russian banks had lost a combined 1.5 trillion roubles (£22bn) in the first half of the year as Western sanctions shut the country out of large parts of the global financial system.
It marks the first time Moscow has disclosed figures for its banking sector since the invasion of Ukraine. Russia’s financial system has been a key target of sanctions as the West tries to stymie the Kremlin’s war chest.
Dmitry Tulin, first deputy chairman, said around two thirds of the losses came from foreign currency operations as lenders were blocked from trading in dollars, euros and other currencies.
He told business newspaper RBC that the losses were concentrated among Russia’s “systemically important” banks, which are the largest and have higher capital adequacy requirements.
Mr Tulin insisted the central bank did not expect a repeat of the 2014-17 banking crisis, when the regulator had to bail out several lenders.
In June, Russia defaulted on its foreign debt for the first time since the Bolshevik Revolution in 1918 after the US blocked access to $600m ($521m) of funds in Wall Street banks, leaving it unable to make repayments.
The central bank’s assets have been frozen, blocking access to more foreign reserves, while many Russian lenders have been excluded from the Swift international payments system. The UK has also frozen Russia out of its financial system, alongside its move to phase out all energy imports from the country.
Mr Tulin said it had become “more and more problematic” for Russian lenders to make payments in “toxic” currencies even when they were not directly targeted by sanctions.