The war in Iran has disrupted oil and gas supplies in the Middle East, causing a surge in global oil and gas prices and benefiting Russia, which relies heavily on energy exports for its economy. In addition, Russian President Putin has warned that Russia may immediately stop supplying gas to Europe.

On Thursday, March 5, Russian oil export prices rose from less than $40 per barrel in December last year to about $62 per barrel, which, although lower than the international benchmark Brent crude price (over $82 per barrel), is higher than the $59 per barrel estimate in Russia's 2026 budget.

Petroleum and natural gas tax revenues account for as much as 30% of the Russian federal budget, serving as a key pillar for funding the war in Ukraine. Previously, data from the Russian Ministry of Finance showed that the country's oil and gas revenue in January fell to a four-year low of 393 billion rubles (about $5 billion), with a budget deficit of 1.7 trillion rubles ($21.8 billion) that month, a record high. However, after the outbreak of the Iran conflict, the situation changed abruptly: almost all oil tanker shipments through the Strait of Hormuz were interrupted. This vital strait used to handle about 20% of global crude oil maritime transport, and 90% of energy exports from Middle Eastern oil-producing countries pass through here.

"Russia is the biggest beneficiary of this energy turmoil related to the war," said Simone Tagliapietra, an energy expert at the Brussels-based Bruegel Institute. "Rising oil prices mean increased government revenue for Russia, thereby making it more capable of funding the war in Ukraine."

Putin warns of possible immediate "cut-off" of gas to Europe

In addition, Russia has turned energy supply into a tool to threaten Europe. On Wednesday, March 4, Russian President Putin warned that due to the energy price surge caused by the Iran crisis, Russia might immediately stop supplying gas to Europe.

He stated this while answering questions from a Russian state television reporter stationed at the Kremlin. He said that given the EU's plan to restrict and eventually ban imports of Russian gas, Russia could consider stopping gas supplies to Europe now and turning to other open markets, which might be more beneficial for Russia. While accusing the EU of years of "wrong policies," Putin said, "Due to the situation in the Middle East, the closure of the Strait of Hormuz, etc., there are customers willing to buy gas at higher prices; this is a natural phenomenon; there is no political purpose – it's just business."

Putin also said, "If such high-end buyers appear, I believe, and am even certain, some traditional suppliers, such as Americans and American companies, will certainly leave the European market and go to higher-priced markets."

However, Putin also stated that "immediately stopping gas supplies to Europe" is not the final decision, and he will instruct the government to study the issue. He also said that Russia remains "a reliable energy supplier for all our partners," and "we will continue to cooperate in this way with those reliable partners – for example, countries in Eastern Europe such as Slovakia and Hungary."

Russia has the world's largest natural gas reserves. After Russia launched a full-scale war against Ukraine in 2022, Europe sought to reduce its dependence on Russian energy. For example, Russia previously supplied about 40% of the EU's pipeline gas, but according to EU statistics, only 6% of the pipeline gas imported by the EU last year came from Russia.

On January 26, the 27 EU member states officially adopted regulations on gradually banning the import of pipeline and liquefied natural gas (LNG) from Russia. A complete ban on LNG imports from Russia will take effect at the beginning of 2027, and a complete ban on pipeline gas imports will take effect in the fall of 2027. However, the outbreak of the Iran conflict has raised doubts about the EU's above-mentioned plans. In many European countries, people still remember the energy crisis caused by Moscow cutting off most pipeline gas supplies after the war in 2022.

The duration of the closure of the Strait of Hormuz is a critical factor

Alexandra Prokopenko, an expert on Russian economic issues at the Carnegie Center in Berlin, said that the question of how long the Strait of Hormuz will remain closed for most ships is crucial. If the strait remains closed for a long time, and if Iran's attacks damage oil refineries and pipelines in the Middle East, oil prices could rise above $100 per barrel, exacerbating inflation, pushing Europe to the brink of recession, and bringing the greatest windfall to Russia. If the conflict ends quickly, the Brent crude price would drop to around $65 per barrel, and "the short-lived price surge will not fundamentally change" Russia's fiscal situation. If part of the shipping resumes and prices stabilize around $80 per barrel, Russia will experience "some fiscal relief."

Chris Weafer, CEO of Macro-Advisory Ltd, said that even a few weeks of disruption in Gulf LNG supplies could lead to calls within Europe to suspend the implementation of regulations banning new supply contracts with Russia after April 25. He said, "The EU faces greater pressure to work with the U.S. to seek a solution to the Ukraine conflict and is likely to consider relaxing its comprehensive plan to ban Russian oil and gas imports. Hungary, Slovakia, and other countries, as well as major buyers of Russian LNG in Europe, will urge the EU to reconsider this plan."

Weafer also said that regardless of the situation, "due to reduced discounts on Russian oil and strong demand for Russian oil and petroleum products, the Russian federal budget will be much better in March."

Amena Bakr, head of the Middle East and OPEC at data analytics company Kpler, noted, "Because of the logistics disruptions in Middle Eastern crude oil supply, India and China have strong incentives to deepen their reliance on Russian supplies."

Sources: Reuters, Associated Press, DW

Original: toutiao.com/article/7613869834962584079/

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