Energy war heats up as Biden announces release of oil reserves; Putin demands payments in roubles
WASHINGTON DC (Kurdistan 24) – Energy has become a key front in the confrontation over Russia’s assault on Ukraine. The US and Europe seek to weaken and punish Moscow with tough economic sanctions, but their ability to do so is limited by the fact that Europe is heavily dependent on imports of Russian energy.
Russia supplies 40% of Europe’s natural gas, while over 25% of the oil that Europe imports come from Russia. That dependency developed in the years after the collapse of the Soviet Union and reflected a radical misunderstanding of the situation in Russia.
Key Role of Energy
Two parallel announcements—one by US President Joe Biden and the other by Russian President Vladimir Putin—underscored the central role of energy in the Ukraine crisis,
To confront supply shortages and deal with rising prices, Biden announced the release of an unprecedented amount of oil over America’s Strategic Petroleum Reserve (SPR).
For his part, Putin demanded that “unfriendly countries”—i.e., those imposing sanctions—pay for their energy imports in Russia’s currency rather than in euros or dollars, as stipulated in the current contracts.
The Kurdistan Regional Government (KRG) exports oil and is developing gas exports, as KRG Prime Minister Masrour Barzani explained earlier this week at the Atlantic Council’s Global Energy Forum in Dubai.
The KRG is doing as much as possible to increase production, Barzani explained, but the Kurdistan Region has been attacked by Iran, while Iranian proxies also targeted Saudi oil facilities.
Read More: US sanctions Iran for missile attacks on Erbil, Saudi Aramco
In addition, the Federal Supreme Court in Baghdad, where Tehran exerts considerable influence, has also sought to restrict KRG energy exports, even as Erbil has rejected the court’s ruling as illegal and unconstitutional.
Biden Orders Release of Oil
Gasoline prices have risen markedly in the US, first because of the COVID pandemic and then because of the crisis over Ukraine.
On Thursday, Biden announced that he was ordering the release of one million barrels of oil per day from the SPR for the next six months—i.e., 180 million barrels of oil.
The announcement marks the largest such release of oil in the 50-year history of the SPR.
Biden described the move as a “wartime bridge,” which will give US oil companies the time to ramp up their own production. They have said that such a timetable is feasible.
In addition, Biden has coordinated this move with US allies. “We have commitments from other countries to release tens of millions of additional barrels into the market,” he said.
Putin Demands Europe Pay for Energy Imports in Rubles
Also, on Thursday, Putin, speaking on Russian television, issued a surprise demand that “unfriendly” countries—i.e., those that have imposed sanctions on Russia—must pay for their energy imports in Russian rubles.
“To buy Russian gas, they need to open rouble accounts in Russian banks,” he said. “It is from those accounts for which gas will be paid, beginning on April 1”—i.e., the next day.
European countries, most notably Germany, the largest importer of Russian energy, have rejected Putin’s demand as “blackmail.”
Yet, despite Putin’s tough stance, payment on gas imported during April is not due until May 1, and it remains to be seen what will actually happen. If Russia were to cut off its energy exports to one or more European countries, as Putin threatened, he would also jeopardize Russia’s biggest source of income, which it badly needs now.
Putin had expected a quick victory in Ukraine. Instead, the war has dragged into its second month.
On Thursday, Britain’s Defense Secretary, Ben Wallace, described Putin as “a man in a cage he built himself,” while “his army is exhausted” and “he has suffered significant losses.”
“He has not only got to live with the consequences of what he is doing to Ukraine,” Wallace continued, “but he has also got to live with the consequences of what he has done to his own army.”