Russia has abandoned plans to reopen a major gas pipeline that carries natural gas to Europe.
The move by state-controlled Gazprom will make it harder for Europe to get fuel ahead of winter.
Gazprom said the Nord Stream 1 pipeline would remain closed due to a leak in the main gas turbine, although Siemens Energy – which usually maintains the turbines – said such a leak should not prevent operation.
Europe and the US National Security Council have accused Russia of using gas as a “weapon against consumers”.
But earlier, European Council President Charles Michel promised: “The use of gas as a weapon will not change the EU’s resolve.
Wholesale gas prices have soared 400% since August last year, wreaking havoc on households and businesses in Europe, where reliance on Russian energy has historically been high.
Also on Friday, G7 finance ministers agreed to impose a price cap on Russian oil exports to make it harder for Vladimir Putin to finance his invasion of Ukraine.
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Despite selling less oil since the start of the war, Russia earned £600m more from oil sales in June than in the previous month due to war-induced price spikes .
British Chancellor Nadhim Zahawi said the price cap would also bring global price stability which would “protect our citizens from oil shocks next year”.
He added: “It will mean that Putin cannot take advantage of excessively high oil prices and of course protect us all from oil price shocks next year and beyond.”
Ukrainian President Volodymyr Zelenskyy, who has repeatedly called for tougher sanctions against Russia, said the move “will not only limit the flow of petrodollars and gas euros to Moscow, but also, and above all, will restore justice for all Europeans, whom Russia is trying to blackmail. with artificially inflated prices on the energy market”.
But former Russian President Dmitry Medvedev wrote on Telegram that Moscow would retaliate by completely cutting off supplies to Europe, saying: “There will simply be no Russian gas in Europe.”
Germany, one of the most dependent on Russian energy, is preparing for a reduction in gas supply and its network regulator has warned citizens and industry to reduce their consumption.
A heroic wish list that remains very short in detail
G7 and EU countries have already pledged to cut or curb imports of Russian oil and gas.
The “price cap” announced today by G7 finance ministers is an attempt to further stifle Moscow’s fossil fuel revenues by targeting service companies that provide the logistical and administrative architecture of the oil trade.
The G7 says service providers will be barred from “permitting the shipping” of crude oil and petroleum products if they are traded above a cap yet to be determined.
The release is not specific about services, but we can assume that shipping, transport, insurance, finance and trading companies, many of which are based in the EU, US, United Kingdom and Switzerland are in the sights of finance ministers.
The aim, according to Chancellor Nadhim Zahawi, is to reduce Moscow’s oil revenues while protecting low- and middle-income countries that still depend on Russian imports, and to insulate British consumers from future price shocks.
It’s a heroic wishlist but still theoretical and very short on details. This statement only signals an “intention to finalize and implement” a plan and it is unclear how it would be implemented.
What is clear is that existing measures to reduce reliance on fossil fuels are not hitting Kremlin revenues as hard as hoped.
Even though Russian oil export volumes have fallen, rising world prices triggered by the war mean that revenues are rising. Research from the Center for Energy and Clean Air suggests revenue rose in July as exports fell 6%.
And while Western customers are turning their backs, India and China are taking over, with Beijing now depending on Moscow for almost 25% of oil imports.
The G7 decision is an acknowledgment that so far Russia’s strategic weaponization of fossil fuels has been a strategic win-win.
As European consumers are hit with higher bills, perhaps weakening support for Ukraine, Moscow is still cashing in.