Russia’s President Vladimir Putin had a multi-faceted plan to invade Ukraine, including a military and an energy war. Although neither war is over, Putin’s army failed to seize Ukraine as planned, and his energy war has failed too, as many nations are now united against Russia, blunting Putin’s most potent economic weapon. Putin’s energy war worked initially, but the unpredictable nature of the sanctions generated a fear premium in energy markets that pushed up prices. However, soaring energy prices did not wreck the economies of Ukraine’s allies as Putin had hoped. The nations have reconfigured their energy supply chains with speed and skill, parrying Putin’s energy offensive. Several concerted actions by Ukraine’s allies parried Putin’s energy offensive, and Putin never slowed or stopped Russian oil sales. Europe dramatically revamped its natural-gas supply chains, with much of that gas going to Turkey and Balkan nations not fully participating in sanctions. The United States and other large nations have also developed novel ways to begin sanctioning Russian energy while keeping supplies on the market and prices low.
The energy war that President Putin planned to parallel his military war against Ukraine in 2022 failed to deliver the expected results. Putin’s plan was to cause an energy crisis among Ukraine’s allies by driving up energy prices, which would undermine public support for sanctions and aid to Ukraine. However, the strategy failed as the many nations that were now allied against Russia worked hard to blunt Putin’s most potent economic weapon. As a result, oil, gasoline and natural gas prices are now lower than they were before Putin invaded Ukraine.
Europe’s Natural Gas Supply Chains Revamped to Reduce Dependence on Russia
One of the ways in which the nations allied against Russia reconfigured their energy supply chains was by revamping natural gas supply chains in Europe. This led to the portion of gas coming from Russia dropping from 40% to less than 10%. Much of the gas that comes from Russia goes to Turkey and Balkan nations that are not fully participating in sanctions. Gas shipped on tankers from the United States and Qatar backfilled much of the supply lost from Russia.
The United States and other large nations have also developed novel ways to begin sanctioning Russian energy while keeping supplies on the market and prices low. In December, a U.S.-led group of large nations imposed a price cap of $60 per barrel on Russian oil. This has helped to keep the prices low and prevent Russia from using its energy resources as a weapon against other nations.
The failure of Putin’s energy war has important implications for Russia’s economy and its ability to use energy as a tool of foreign policy. It shows that other nations can quickly adapt to changes in the energy market and develop new sources of supply to replace those lost due to sanctions. It also highlights the need for Russia to diversify its economy and reduce its dependence on energy exports. The failure of Putin’s energy war demonstrates the limitations of using energy as a tool of foreign policy and the importance of developing more sustainable and resilient energy systems.
