Russian oil output is rising, prices have recovered and Russia is finding support among OPEC countries. All these indicators give reason for the author of the Bloomberg article to say that Putin is winning the energy war. At that Europeans themselves will feel the new prices for electric energy since October.
Whichever indicator you look at, President Vladimir Putin is winning the energy markets, writes Bloomberg. “Moscow is milking its dairy cow,” earning hundreds of millions of dollars every day. Once new sanctions against Russian oil go into effect in November, the energy crisis will begin to bite Europeans, and European governments will be faced with hard choices.
Electricity bills will begin to rise as early as October. In the UK this increase is expected to be 75%, while in Germany in some places up to 100%. Western governments will have to spend billions either to subsidise their residents or, as France is already doing, to control energy producers.
The first indicator that shows how Putin is making money from oil is the amount of oil produced. Production in July came to nearly 10.8 million barrels per day, just short of the 11 million barrels typical of January. After European buyers refused, Russia found new customers. Most of the oil released is now going to India, but also to Turkey and other Middle Eastern countries. And even some Europeans are still buying it, preparing for a complete halt in purchases in November. By the way, the author himself had previously thought that Russian production would fall but he admits he was wrong.
The second indicator is the price of Russian oil. Initially Moscow had to make a discount to attract partners. Recently, however, prices have rebounded. Moscow has found new traders who buy Russian oil and send it to markets where there are shortages. “At the very least, sanctions are not working now,” notes the author of the article.
The third indicator is political. In the spring, Western countries thought OPEC would break its alliance with Russia. But in the end it turns out to be exactly the opposite. Shortly after Joe Biden’s trip to Saudi Arabia, Russian Deputy Prime Minister Alexander Novak arrived there. And a few days later OPEC announced a very tiny increase in oil production, which keeps the pressure on global energy markets.
“Winning the oil markets” means Putin can do without the revenues he has been getting from gas and oil sales to Europe, which will increase pressure on Berlin, Paris and London. The combination of cold weather, rising energy demand and rising prices could lead to reduced support for Ukraine, as politicians are unlikely to be willing to pay the price and lead their populations into energy poverty. In public, European politicians are still in favour of abandoning Russian energy. But internally they understand the impact on their economies.
“Putin is winning the energy battle; one can only hope that this leverage is not strong enough to make Western politicians soften their stance in the real war,” Bloomberg notes.