War in Ukraine: Russia says it may cut gas supplies if oil embargo goes ahead

Russia has announced it will close its main gas pipeline to Germany if the West imposes a Russian oil embargo.

Deputy Prime Minister Alexander Novak said a “rejection of Russian oil would have disastrous consequences for the world market,” causing prices to more than double to $300 a barrel.

The US has been exploring with allies a possible ban to punish Russia for its invasion of Ukraine.

But Germany and the Netherlands rejected the plan on Monday.

The EU gets about 40% of its gas and 30% of its oil from Russia and has no easy substitute if supplies are disrupted.

Speaking on Russian state television, Mr Novak said it was “impossible to quickly find a replacement for Russian oil on the European market”.

“It will take years and it will still be much more expensive for European consumers. Ultimately, they will be hit the hardest by this result,” he said.

He pointed to Germany’s decision last month to freeze certification of Nord Stream 2, a new gas pipeline connecting the two countries, adding that an oil embargo could lead to retaliation.

“We have every right to make such a decision and impose an embargo on gas pumping through the US [existing] Nord Stream 1 gas pipeline,” he said.

Russia is the world’s top producer of natural gas and the second-biggest producer of crude oil, and any attempt to sanction its energy industry would severely damage its own economy.

Ukraine has begged the West to enact such a ban, but there are concerns it would push up prices. Investor fears of an embargo pushed Brent crude to $139 a barrel at times on Monday – the highest level in almost 14 years.

Average UK petrol prices also hit a new record of 155 pence per liter.

Citing unnamed sources, Reuters news agency reported that the US could be ready to push ahead with an embargo without its allies, even though it only gets about 3% of its oil from Russia.

On Monday, however, Chancellor Olaf Scholz dismissed the idea of ​​a broader ban, saying Europe had “deliberately exempted Russian energy from sanctions” because its supply could not be secured “by other means” at the moment.

However, European powers have pledged to move away from Russian hydrocarbons over time, while some Western companies boycott Russian supplies or promise to divest their stakes in Russian energy companies.

Mr Novak said Russian companies are already feeling the pressure of US and European moves to reduce dependence on Russian energy, even though they have fulfilled all contractual obligations to supply oil and gas to Europe.

“We are concerned by the discussions and statements we are seeing regarding a possible embargo on Russian oil and petrochemicals phasing out,” he said.

“We see our partners, dealers, shipping companies, banks and financial institutions coming under enormous pressure.”

His comments came as a third round of Ukraine-Russia peace talks in Belarus made little headway.

More than 1.7 million Ukrainians have fled to central Europe since the conflict began on February 24, the United Nations High Commissioner for Refugees said on Monday, with over 1 million arriving in neighboring Poland.

Kremlin spokesman Dmitry Peskov told Reuters Moscow will shut down operations if Ukraine ceases fighting, amends its constitution to declare neutrality, and recognizes Russia’s annexation of Crimea and the independence of regions backed by Russia separatists are held.

A Ukrainian negotiator said that although small progress had been made in agreeing on the logistics for evacuating civilians, things remained largely unchanged.

“So far there are no results that significantly improve the situation,” said Mykhailo Podolyak.