Russia has slowed its gas exports to Europe since it invaded Ukraine. A Yale University analysis found that the move hurts Russia more than Europe. Russia is turning to customers in the east, but countries like China and India are negotiating hard.
Russia has slowed gas supplies to Europe since it invaded Ukraine – and the commodities giant is under “severe pressure” because of it, according to a Yale University analysis. “Contrary to widespread alarm about the negative effects of the Russia-Ukraine war on global commodity prices, the importance of commodity exports to Russia far exceeds the importance of Russian commodity exports to the rest of the world,” the Yale researchers wrote in analysis. , was released on July 20. Europe depends on Russia for 40% of its natural gas needs, such as cooking in homes and firing power plants. It is a concern for a winter energy crisis as Russia has cut gas flows to the continent, citing sanctions-related challenges. Even so, the Yale authors argued that the Russian economy would be “hurt more” in the long run by shifting gas supply chains. That’s because the European Union has already agreed to end almost all oil imports from Russia by the end of this year and has said it will cut coal imports from mid-August. European countries, including Germany and Italy, are also working to wean themselves off Russian gas. Russia’s export revenue comes largely from commodities. “This export revenue made up more than half of Russia’s total state budget in most years—and probably an even larger percentage now,” the Yale team wrote. The study, led by Jeffrey Sonnenfeld, a professor at the Yale School of Management, also found that the Russian economy has been “shaking” by sweeping international sanctions. His findings contradict studies of the Russian economy that show it is holding up better than expected, in part because of strong profits from its massive oil and gas industry. The story continues
Putin turns east to sell Russian energy, but buyers are driving hard bargains
To cushion the impact from lower energy sales in Europe, Russian President Vladimir Putin is pushing Russia’s energy exports to other markets, such as Asia — but at a discount. “Isolation from the West has damaged Russia’s strategic hand in negotiations with China and India, notoriously price-conscious buyers with close ties to other major commodity exporters,” the Yale team wrote. “These countries have not been shy about taking advantage of pariah countries under sanctions, with China regularly driving massive discount oil deals with countries such as Iran and Venezuela,” the authors add. Since the invasion of Ukraine, prices of Russia’s flagship Urals crude oil have fallen significantly. Urals was priced at a $1.50 premium to international Brent crude from January to February, but has since fallen to a $25.80 discount to Brent, according to Bloomberg data compiled by Russia’s Finance Ministry and Intercontinental Stock exchange. “It now faces from a position of weakness the loss of its old core markets,” the Yale team wrote, adding that Russia’s strategic position as a commodity exporter has been “irreversibly deteriorated.” Read the original article on Business Insider
