The sanctions of Europe on Russia was meant to punish Putin who waged war on Ukraine for over 10 days now. However, the current situation has predicted Europe can be affected as oil prices nationwide continues to rise.
Without a doubt, Saudi Arabia is the biggest exporter of crude oil but Russia, is the second-in-command. As more sanctions are being imposed on the country’s financial institutions, the world in general have experienced a rise in the cost of Crude Oil.
Russia is also a huge exporter of natural gas and without a doubt, high cost of crude oil spells gains for the former Soviet Union powerhouse to a fault. Since Russia’s economy have experienced inflation due to unfavourable sanctions on its financial and sports institutions, it is safe to assume that Russians are indeed living in perilous times.
Nevertheless, non-oil producing nations are predicted to suffer the most from the global crude oil surge as the purchasing power will rise; the same applies to labour costs.
Europe, as a case study imports two-fifth of its natural gas from Russia. Hence, the continent is susceptible to pay more for energies given the fact that they have extended the sanctions to its oil and gas sector. Some countries are cautious of sanctioning Russia’s oil and gas – Germany are applying caution on the situation.
Nonetheless, the International Monetary Fund (IMF) has expressed concerns towards over the rising cost of energy given that nations across the world are just recovering from the economic damages already caused by the novel Covid-19 pandemic.
At January 2022, it was learnt that the European Union were paying €190m a day for natural gas. However, as a result of the war and sanctions accompanying, the price have risen over 200%: selling at €610m per day.
Crude Oil was selling between $2 to $3 before the invasion but have spiked to $25 per barrel which is expected to be worse in the coming days. This ugly twist of events comes with terrible and drastic economic implication but questions on alternative energy supply have also been raised.
Nevertheless, as Russia continues to raise prices, economic pointers predict that the country is suffering from sanctions imposed by the west.
Even as Europe are imposing the sanctions on Russia to cripple its economy, it is no-brainer that the policy also affects European Union – raising the cost of energy.