Home Business Biggest Domino Has Fallen In Strategy To Weaken Russia

Biggest Domino Has Fallen In Strategy To Weaken Russia

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“The biggest domino has fallen in the strategy aimed at further isolating Russia and weakening its economy.  The US ban on Russian energy imports is the toughest economic sanction yet on Moscow given how reliant the country is on oil and gas revenues. The move has pushed a barrel of Brent crude up to over $132 a barrel, and prices are set to march higher given speculation is now rife that more governments,  including the UK, will also begin imposing boycotts of Russian energy imports. With supply constrained, while demand rockets for supplies from elsewhere in the world, it seems the only way is up for energy prices. Comments from the chief executive of Saudi Aramco that the Ukraine conflict is making the energy crisis even worse has done little to calm nerves. CEO Amin H. Nasser stressed that there is no capacity in the market right now that could replace 7 million barrels of oil which Russia currently supplies to the global market per day.

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The Reliance On Russian Energy Supplies

The expected move from Washington had already pushed up the share prices of European energy giants, with BP plc (LON:BP) surging by more than 5%, Shell PLC (LON:SHEL) by more than 3% and TotalEnergies SE (LON:TTE) by more than 3.5%. In New York Chevron Corporation (NYSE:CVX) surged 7.8% and Exxon Mobil Corp (NYSE:XOM) lifted 4.8% But the inflation implications of the US move, as well as the uncertainty about the repercussions this will have on the conflict, has caused a jolt of fresh volatility across the world’s financial markets with losses accelerating on the S&P 500 and Nasdaq Composite in morning trade.

Just how long countries like Germany will hold out from joining a ban is unclear, as falling into line with US policy has the potential to cause huge economic pain given its reliance on Russian energy supplies. Moscow has already warned that it may close its main pipeline to Germany if a boycott is put in place.

There is no magic wand to wave to speed up the shift to renewables and although the EU has pledged to accelerate the process of weaning member countries off Russia, it’s going to be a hugely difficult and expensive transition. There are hopes that European countries will be given financial breathing space through a huge joint bond issue which had helped bring a sense of calm to equities during the trading day in Europe. But gains evaporated on the DAX in Frankfurt near the close, as investors digested the increasing possibility of an energy supply squeeze, and the repercussions for the country’s energy intensive industries.”

Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown


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