Yahoo Finance Russia is attacking Europe with 'energy card', says economist
Russia’s refusal to reopen a key natural gas pipeline into Germany is an economic attack against Europe, according to one economist.
“Russia is attacking Europe. There’s no other way to put it,” Simon Johnson, former IMF chief economist told Yahoo Finance Live. “They want to play the energy card. They’ve built up a hard grip on the throat of Europe."
On Friday, the European Union discussed a price cap on Russian gas. Ministers agreed that a price limit on energy imports needs more work.
Meanwhile, the bloc of G7 countries [United States, Canada, France, Germany, Italy, Japan, and the UK] aims at implementing a price limit on Russian oil to decelerate Europe’s energy crisis.
“It’s going to be difficult for Europe and other European countries over the next year,” said Johnson. “But they’re going to have to get off of Russian energy because they can’t live with Putin holding a dagger to their hearts.”
Earlier this year, energy prices soared following the Russian invasion of Ukraine. The price of oil and natural gas has pulled back recently, but still sitting well above levels from one year ago.
Natural gas futures in Europe hit all-time highs last month, up around 500% from 2021. They have since pulled back to sit about 300% higher than in September of last year.
The Nord Stream 1 natural gas pipeline, which runs from Russia to Germany, was shut down for maintenance last week. Many Europeans suspected Moscow would not reopen it.
Russia says Nord Stream 1 is closed indefinitely until sanctions from the west are lifted. Concerns over rationing, blackouts and even civil unrest are rising as Europe heads into the winter.
Meanwhile, the European energy crisis “puts U.S. refiners in a more privileged position,” according to oil analyst Tom Kloza.
He sees demand for diesel and heating oil increasing as the US exports more of these to Europe in an attempt to substitute those refined products for natural gas.
On Friday, West Texas Intermediate (CL=F) crude futures climbed about 3%. Brent (BZ=F) international also rose by about the same percentage.
Ines Ferre is a reporter for Yahoo Finance covering the US stock market. Follow her on Twitter at @ines_ferre.
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