A side issue in another thread that I thought should be fully explored, since I think it greatly impacts the rationality of Putin’s recent actions.
If Russia turns off its energy exports to the rest of the world, how will it impact the rest of said world? How long would it take to result in shortages and inflationary spirals so bad that Europe and China would have to give in (resulting in what seems to me to be a major victory for Russia and a major blow to the West’s reputation)? Is it sufficiently short time for Putin to get his claws into Ukraine?
Hasn’t the West already turned off those exports? Paying a couple extra bucks at the pump over the next few years will be painful, but it’s nothing compared to having your national currency drop 30% in value in one day.
Long answer, if Russia does cut off oil long-term, that will drive up the price of oil, which means that lots of other oil producing places will become economically viable again.
Ask any Albertan and they’ll tell you, the oil sands have enough oil to fuel The Entire World Until The End Of Time, which is of course an exaggeration, but based on some truth. The big problem with the oil sands is that it’s expensive to get that oil out of the ground, and to market.
But if Russia is out of the game long-term, the increase in the price of oil makes Alberta profitable again, and those guys would be happy to sell you as much as you can drink.
At least since 9/11 if not before, the countries that have been causing problems seem to have been the ones that produce oil and natural gas so my thought after 2001 was that the proper response should have been to escalate the development of alternative sources of energy as well as ramping up energy efficiency programs (vehicles, appliances and building standards). And the same thing is true today; Russia, which is basically a giant gas station, is causing problems for its neighbor.
Russia needs to export energy as badly as Europe and the rest of the world needs to import it. My guess is that it was calculated that a swift enough victory in Ukraine would be a fait accompli; and no matter how much the rest of the world disapproved, the Kremlin was sure that “they’d get over it”. NOT having a fait accompli puts Russia in a much more problematic position.
Although petroleum and gas are a vital concern, what I’ve heard is even more a factor in Western restraint is Russian money: that fully sanctioning all of Russia’s finances and investments would destroy the world economy.
Likely some places can ramp up fairly quickly short term to head of the worst of supply spikes.
The US could follow, depending if the operating companies can get the capital to fund the required activity. Yes they will be getting more revenue right now due to increased prices , but I suspect a lot of operators will use that to pay down some significant debt first. Then they still need to raise capital in a market that is not keen to lend , either due to external pressures or not wanting to get burned again.
The service companies that the operators rely on to do the work are not in great shape, extremly capex and people limited and not likely to spend money on equipment and capacity until prices with the operators rise.
Now all that money does largely get spent within the US , so its recirculating the money into the economy rather than sending it overseas which is a good thing, going to take time.
In the face of embargos I am sure Russia will still be able to sell its oil to china and a few other countries , so China won’t have to go to the international market and purchase as much oil , which will help relieve some pressure on prices, but Russia will get rock bottom prices for it.
Back in the mid 2000s Turkmenistan told Russia it needed to pay more for the gas they exported to Russia (long story of stranded gas and lack of interconnected gas pipelines) as Russia was selling its gas , via Ukraine, to Europe. Russia said no, so Turkmenistan turned the export lines off. A week later they had to turn them on at an agreed lower price. They needed money, gas exports were almost the only source of regular income other than seasonal cotton harvest income.
Russia is not far off that situation, they have currency reserves, but they can’t live off that for long , and those reserves are needed as backing for loans etc.so they can’t eat too far into them. They need the cash and a black market low price sales are not going to keep them afloat.
This is yet another pressing reason to get off fossil fuels ASAP; to stop supporting petro-states like Russia, the gulf states, Venezuela, Nigeria etc etc. Virtually none of the money those countries make from it go to the common people anyway.
The faster we transition to electric transport and heating, the sooner we remove their threat over much of the world.
Short answer: it thought it did. Germany, satellites and Eastern Europe depended on Russian oil and LNG, making significant investments used to bolster Russia’s reserves.
More answer: Few expected Germany to change its foreign policy, other countries to weigh security costs against convenience, big investors like Shell and Exxon to pull out of medium projects in Russia.
More answer still: The world still needs oil and divesting will take more time, trust and technology. This is largely seen as Putin’s war but BRICS countries and Israel have sometimes been muted in criticism although this may have changed. It is unclear how much costs and convenience will be a future factor. The financial effects and Chinese support are unknowns. Ukraine has enormous support in Canada and Russians here complain of being misunderstood. The West has unified in a way which seemed unlikely a month ago. America produces much more oil than it once did. Possible Russian allies like Venezuela have their own problems.
Israel has been trying to keep its response relatively muted not because of oil, but because of the Russians’ S-400 AA batteries in Syria and and their tacit agreement not to get in Israel’s way when it goes after Iranian and Hezbollah assets. It’s a very delicate game, and Israel does not want to be the one to open a second front in the war.
Last month Republican talk radio was sometimes praising Putin. This has changed completely, with a vocal minority saying America should use its military to intervene. They likely won’t. But the change is sudden and surprising.
Natural gas is probably a stronger potential weapon for Russia than crude oil. Russia exports a lot of natural gas to Europe, and Germany in particular. I don’t see how the Germans could quickly replace this gas if Moscow turned off the tap.
The Ukraine crisis has plunged Germany into an intense debate about how it will heat its homes and power its industry in future, summed up in the short question: can Europe’s largest economy function without Vladimir Putin’s gas?
The Green federal economics minister, Robert Habeck, answered with a decisive “yes it can”, a day after the chancellor, Olaf Scholz, announced the suspension of the Nord Stream 2 pipeline, which was meant to deliver from Russia as much as 70% of Germany’s gas requirements. There are considerable doubts as to whether the $11bn project will ever now go ahead.