Russia drops NS1 stimulus after G7-backed oil price cap

The energy tug of war between the West and Russia became even more heated on Friday when the finance ministers of the Group of Seven (G7), to punish Moscow for its unwarranted invasion of Ukraine, endorsed a global price cap Russian oil, to which Russia reacted by postponing the relaunch of its Nord Stream 1 gas pipeline to Germany.

The finance ministers of Britain, Canada, France, Germany, Italy, Japan and the United States, which are the states that make up the G7, have confirmed their commitment to form a cartel of buyers after a virtual meeting. Key details, they nevertheless pointed out, including the level per barrel of the price cap, would be determined later “based on a range of technical inputs” to be agreed by the coalition of countries implementing it. .

On Friday, White House press secretary Karine Jean-Pierre said capping global Russian oil prices would significantly reduce Russia’s revenue to continue the war in Ukraine.

With the price cap, more countries would have better leverage to strike deals with Russia, she said, adding that the White House would work in the coming weeks to determine the price cap level.

The European Union is now preparing to ban crude oil exports from Russia in early December and refined products two months later.

Ukrainian President Volodymyr Zelenskyy welcomed the G7’s decision.

“When this mechanism is implemented, it will become an important element in the defense of civilized countries, energy markets against Russian hybrid aggression. And in fact the price of Russian gas should also be cappedsaid President Zelenskyy in his evening speech.

The Kremlin strikes back

In response to the move, the Kremlin said it would stop selling oil to countries with price capsadding that it would destabilize global oil markets.

But Moscow didn’t stop there, and its state-controlled energy giant Gazprom scrapped the deadline on Saturday to resume flows on the line. The pretext – an alleged technical fault in the Nord Stream 1 pipeline. This has put another obstacle in Europe’s way of getting fuel for the coming winter.

The company said it could no longer provide a time frame to restart deliveries through the pipeline, which flows under the Baltic Sea to supply Germany and others. Nord Stream 1 was due to resume operations after a three-day shutdown for maintenance at 01:00 GMT on Saturday.

However, Russia’s state-owned gas company also said on Saturday it would ship 42.7 million cubic meters of natural gas to Europe via Ukraine. The statement came hours after it was announced that flows through the Nord Stream 1 pipeline to Germany would not resume as planned.

According to Reuters, flows through the Sudzha entry point increased slightly from the 41.3 million m3 sent by Gazprom on Friday. This quantity was still not enough to compensate for the missing gas that had to be pumped via Nord Stream 1 on Saturday.

Moscow tried to stir the dog by insinuating that routine operations and maintenance of the pipeline were hampered by Western sanctions.

Gazprom said on Friday it could not safely resume deliveries to Europe until it repaired an oil leak discovered in a vital turbine. The company, however, did not provide a new deadline. Commenting on the apology, Siemens Energy, which normally maintains Nord Stream 1 turbines, said such a leak should not prevent the pipeline from operating. The company added that the Portovaya compressor station, where the leak was discovered, has other turbines to keep Nord Stream 1 running.

But Brussels and Washington continue to be disillusioned with Russia and its use of gas as an economic weapon.

It is unfortunately not surprising that Russia continues to use energy as a weapon against European consumers“, a spokesman for the National Security Council told Reuters in an email about the closure of the pipeline that sends gas to Europe.

The NSC spokesperson added that the United States and Europe have worked together to ensure that sufficient supplies are available.

“Thanks to these efforts, European gas storage will be full by the critical winter heating season,” the spokesperson said. “These efforts will not be enough on their own and we will continue to work together to tackle the worrying energy problem in Europe..”

The EU did not have the last word

A strike as powerful as the global oil price cap is for Russia, the EU could push the limits and impose a price cap on the Russian gas pipeline.

“I firmly believe that now is the time to cap prices for the Russian gas pipeline to Europe,” European Commission chief Ursula von der Leyen said on Friday.

“A cap on gas prices can be offered at European level, and there is also a legal basis at European level to temporarily skim profits as an emergency measure in times of crisis.”

EU energy ministers will meet on September 9 to discuss their response to soaring prices. Von der Leyen will then, on September 14, present the Commission’s ideas on emergency EU measures to address the problem of soaring prices, a senior commission official said on Thursday.

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