Rising energy prices may continue amid tensions between Russia and the West

Sanctions could also disrupt energy flows, and any restriction on Russia's ability to trade foreign currency has the potential to change oil and gas markets

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Georgi Velev

Energy prices have risen in Europe and the world after Russian President Vladimir Putin signed an order to send "peacekeepers" to the two breakaway regions of Ukraine, which he officially recognized as republics on Monday night.

European natural gas led the rise by 13%, aided by Germany, saying it would halt the approval process for the controversial Nord Stream 2 pipeline. Brentt closed at near $ 100 a barrel, and electricity and coal prices also rose.

Moscow's move is a dramatic escalation of opposition, in which the UK responds by sanctioning five Russian banks and the European Union plans to restrict access to its financial markets for Russian assets. The United States has said it plans to announce new restrictions on the subject. There were no details on how many troops could enter and when, but a conflict could threaten Russia's energy supplies. The country is Europe's largest gas supplier, about a third of which usually passes through pipelines crossing Ukraine. Russia is also a major exporter of almost everything related to energy to the Old Continent - from crude oil to refined products, recalls the American edition of Time.

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Sanctions could also disrupt energy flows, and any restriction on Russia's ability to trade in foreign currency has the potential to change commodity markets for oil and gas and even affect metal or agricultural markets. "This means even higher natural gas prices for a long time, even though the market has been very nervous for months," said Katya Yafimava, a senior fellow at the Oxford Institute for Energy Research. "Some US and EU sanctions are likely to follow, which will also have an impact on energy markets."

Futures for Dutch gas, the European standard, were 8.4% higher at 78.63 euros per megawatt-hour until 14:26. On the stock exchange in Amsterdam. Brent crude jumped to $ 99.50 a barrel during the day in yesterday's trading before falling to $ 97.58. Energy supply quotes in Germany rose as much as 6.6% next year, while European coal rose 7.9%.

Energy crisis

Energy markets have been on the brink for weeks, swaying with each turn in the West-Moscow confrontation. Europe is struggling with a crisis in gas supplies, which has led to a fourfold increase in prices over the past year. Tensions have contributed to the sharp rise in oil, which is also due to the fact that production cannot cope with ever-increasing demand. "The current rise is a natural response due to very high levels of uncertainty," said Paul Horsnell, head of raw materials strategy at Standard Chartered. "The main scenario may still be a sharp jump in prices and then a significant downward adjustment if energy sanctions prove limited" or countries launch strategic oil reserves to curb growth.

Russia has maintained limited gas flows to Europe since the summer, limiting spot market sales and failing to fill its gas storage facilities in the European Union before the winter. Europe has avoided the worst forecasts for the crisis, including power outages, but the region still depends on Russia for a third of its gas needs. Russia's Energy Minister Nikolai Shulginov said on Tuesday that the country seeks to maintain continuous gas flows, including LNG supplies.

Gas prices have risen, however, after German Chancellor Olaf Scholz said he had ordered the economy ministry to withdraw the security of supply report needed to approve the Nord Stream 2 gas pipeline and give the green light to the project. . The certification process for the pipeline connecting Russia to Germany, bypassing Ukraine, has been suspended since late last year as the operator tries to comply with European Union rules, as requested by Germany's energy regulator. German Foreign Minister Analena Berbok said on friday that Nord Stream 2 would be part of a package of sanctions if Russia invades Ukraine. Yesterday's action by Olaf Scholz caused dissatisfaction among Russian experts. Former Russian President and Prime Minister Dmitry Medvedev, who is currently deputy chairman of the National Security Council, has threatened that Europeans will soon pay a high price for gas.

German Chancellor Olaf Scholz has ordered a halt to the certification procedure for the Nord Stream 2 gas pipeline. Welcome to a new world in which Europeans will soon pay 2,000 euros per 1,000 cubic meters of gas! ”Medvedev wrote on Twitter.

Contracts

The treaties that Putin signed with the two self-proclaimed republics allow Russia to both send troops and build military bases in separatist zones, according to texts submitted to the Russian Word of Ratification. Russia plans to recognize the separatists' claims over the entire Luhansk and Donetsk regions, Interfax reported, quoting State Duma member Leonid Kalashnikov. At the same time, Moscow denies planning to invade Ukraine.

The European Union has proposed an initial package of sanctions targeting those behind the decision, as well as banks financing Russian operations in the two self-proclaimed territories, a statement from Brussels said yesterday. It will also "focus on the ability of the Russian state and government to have access to EU capital and financial markets and services".

The United States and its allies continue to warn that Russia may soon invade its neighbors, and exactly what sanctions the West chooses to impose will be crucial for commodity markets. Over the weekend, British Prime Minister Boris Johnson said the United Kingdom and the United States could stop Russian companies from trading pounds and dollars if Moscow launched an attack.

But Europe is in a much better position to face gas supply disruptions now than at the end of last year. The mild weather and the fleet of liquefied natural gas ships from the United States have delayed the withdrawal of natural gas from gas storage facilities. And stocks that have fallen to record lows must return to normal from the last five years to the end of the month. "We believe that there is enough buffer for stocks so that TTF prices can continue to fall during the European summer," said JPMorgan Chase & Co. in a report, citing prices in the Dutch TTF - a key benchmark for gas prices in Europe.

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