Russian President Vladimir Putin said yesterday that the US-Israeli war on Iran had triggered a global energy crisis and cautioned that oil production dependent on transport through the Strait of Hormuz could soon come to a halt.
Putin said that Russia – the world’s second-largest oil exporter and holder of the biggest natural gas reserves – was ready to work again with European customers if they wanted to return to long-term co-operation.
Western powers, however, have spent the past four years sharply reducing their reliance on Russian oil and gas in response to Moscow’s war in Ukraine and subsequent EU and G7 sanctions.
The loss of the European market has deprived Russia of its most lucrative customers and forced it to sell oil and gas at steep discounts to Asia.
Speaking at a televised meeting with government officials and the heads of Russia’s leading oil and gas producers, Putin said that Russia had repeatedly warned that destabilising the Middle East could lead to an energy crisis with grave implications for the global economy – a turn of events he said had now materialised.
Oil prices exceeded $105 per barrel yesterday to reach peaks unseen since 2022 as the Strait of Hormuz, which accounts for roughly a fifth of global oil and liquefied natural gas flows, has been effectively closed due to the Iran war.
“Oil production dependent on the Strait of Hormuz risks halting completely within the next month. It has already begun to decline, and storage facilities in the region are filling with oil that cannot be transported...is extremely difficult to transport, or is extremely expensive to transport,” Putin said.
He said Russian companies should take advantage of the current situation in the Middle East, though he noted that the spike in prices was probably temporary. Oil and gas revenues make up around a quarter of total federal budget proceeds.
G7 nations said yesterday they were prepared to implement “necessary measures” in response to surging global oil prices, but stopped short of committing to release emergency reserves.
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