The US-Iran war has worsened the "oil and gas shortage"! Putin sends an important signal: willing to restore cooperation with Europe

On Monday local time, Russian President Vladimir Putin stated that the war launched by the U.S. and Israel against Iran has triggered a global energy crisis, warning that Middle Eastern oil production dependent on the Strait of Hormuz could soon come to a halt.

Putin said that if European customers wish to resume long-term cooperation, Russia is willing to work with them again. Additionally, the U.S. government relaxed some sanctions last week, allowing key buyers of Russian crude oil to make purchases.

Russia Signals Willingness to Cooperate with Europe

Russia is the world’s second-largest oil exporter and has the largest natural gas reserves. However, due to the outbreak of the Russia-Ukraine conflict, Western countries have significantly reduced their dependence on Russian oil and gas over the past four years.

Losing the European market, Russia has had to sell oil and gas to Asia at steep discounts.

During a televised meeting with government officials and leaders of major Russian oil and gas producers, Putin stated that Russia had previously warned that destabilizing the Middle East could lead to an energy crisis with serious impacts on the global economy—and now, that scenario has become a reality.

On Monday, international oil prices surged past $100 per barrel, approaching $120, reaching a new high since 2022. The Strait of Hormuz, which accounts for about one-fifth of global oil and liquefied natural gas flows, is nearly closed due to the Iran conflict.

Putin said, “Oil production dependent on the Strait of Hormuz could completely stop within the next month. Production has already begun to decline, and regional oil storage facilities are continuously accumulating unsent oil… This type of oil transportation is extremely difficult or very costly.”

He pointed out that Russian companies should take advantage of the current Middle East situation, but also noted that the surge in oil prices might be temporary. Oil and natural gas revenues account for about a quarter of Russia’s federal budget.

Europe Needs to Send Signals

On Monday, the G7 announced they are prepared to take “necessary measures” in response to the surge in global oil prices but did not commit to releasing emergency reserves immediately.

Putin said, “We are also willing to cooperate with Europeans. But we need them to send some signals indicating they are ready and willing to work with us and can ensure sustainability and stability.”

It is worth noting that recently, the U.S. government relaxed some sanctions, allowing key buyers of Russian crude oil to make purchases. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a statement last Thursday (March 5), announcing a general license related to Russia, permitting the sale of some Russian oil to India, valid until April 4, 2026.

Subsequently, U.S. Secretary of the Treasury Janet Yellen also stated in an interview last Friday (March 6) that, given the surge in global oil prices, the U.S. government is considering lifting sanctions on more Russian oil.

Before the Russia-Ukraine war, Europe’s natural gas imports from Russia accounted for over 40% of its total imports, but after multiple rounds of sanctions, by 2025, Russia’s pipeline and liquefied natural gas exports will only make up about 13% of the EU’s total imports.

(Source: Caixin Global)