Double Whammy: Kremlin Says No Gas For Europe Until Sanctions Lifted; OPEC+ Cuts Oil Output

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Days after indefinitely halting natural gas exports to Europe, Russia said it will resume full gas supplies only when the sanctions against it are lifted by the West.

Kremlin spokesperson Dmitry Peskov blamed the Western sanctions for the halting of gas flows through the Nord Stream 1 gas pipeline, which is the lifeline for energy starved Europe bracing for the winter. Peskov specially cited the UK and Germany, which rallied the rest of the European nations into slapping sanctions on Russia in the wake of the Ukraine war.

Will oil price stay higher after Opec-Russia output reduction?
Opec flag outside cartel's headquarters Reuters

Gas Turbine Repair

Russian gas monopoly Gazprom had said earlier that the western sanctions had resulted in a failure to get the gas turbines serviced in time.

"It is these sanctions imposed by the western states that have brought the situation to what we see now," Peskov said, adding that full resumption of gas supplies to Europe will "undoubtedly" dependent on the lifting of the sanctions.

On Friday, Russia said it was indefinitely stopping natural gas supplies to Europe through the Gazprom pipeline.

The 1,200km Nord Stream 1 pipeline stretches under the Baltic Sea, connecting the Russian coast near St Petersburg to north-eastern Germany. Russia completely stopped gas flows through the pipeline three days ago, citing maintenance requirements.

Hitting Europe Where it Hurts

The West routinely accuses Russia of weaponizing the gas supplies but the Kremlin seems to have veered around to the conclusion that it should hurt the West where it hurts.

Nord Stream gas pipeline
Nord Stream gas pipeline Reuters

European gas gas prices have spiked more than 400 percent in Europe after the supply crisis began in the wake of the Ukraine war. Further output cuts or supply outages will drive prices up again.

Opec+ Cuts Oil Output

In other significant news that signals worry for Europe, OPEC+ has said it will cut oil production by 100,000 barrels a day. The cut will take oil supply levels back to the August levels.

The oil cartel's decision on Monday to cut output gave an edge to the markets, with oil prices rising more than $2 a barrel . While Brent crude futures futures for November delivery hit $96.59 a barrel, US West Texas Intermediate crude rose to $89 a barrel.

The decision of the Opec +, which is led by Russia, to cut output, though nominally, is a direct affront to US President Joe Biden, who has been seeking the Arab allies' help in boosting oil output. A global oil output hike would have helped Biden's cause and diluted the impact of the embargo on Russian oil.

The oil supply crunch following the Ukraine war resulted in an unprecedented rise in inflation in the US and many European countries. Biden travelled to the Middle East in July, seeking the help of allies in ramping up output.

This article was first published on September 5, 2022