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A Problem for Putin
Western Sanctions Threaten Russia's Energy Future

As Western leaders gird themselves to announce a new spate of sanctions later today that could target capital market access of Russian state-owned oil and defence companies, Vladimir Putin is continuing to act as if none of this is constraining his options. But appearances to the contrary, there is some bite there. The FT reports:

[C]ompanies’ attempts to realise the Russian Arctic’s potential are now being severely threatened by the western sanctions imposed on Russia over the conflict in Ukraine. […] And it is not the only project at risk. Other ventures worth billions of dollars are in limbo, putting Moscow’s ambitions to develop its huge Arctic and shale reserves in jeopardy. […]

Their progress is in danger of being disrupted or halted by sanctions that block financing deals and the supply of drilling equipment—measures deliberately intended to hit Russia’s plans to exploit its offshore Arctic and “tight” oil reserves, including the Bazhenov shale in Siberia, which is believed to contain billions of barrels of oil.

The impacts of these limits on Russia’s long-term energy ambitions won’t be immediately felt, but that’s by design. The EU relies on Russia for nearly a third of its natural gas needs, and Moscow’s clout as an oil and gas exporter has Europe rightfully concerned about how sanctions might affect its own energy security.

But the Russian fields currently yielding considerable amounts of oil and gas are maturing, which has already led to a tapering in production. Future production depends in large part on Moscow’s ability to tap unconventional reserves—including plays in the increasingly ice-free Arctic and in Siberian shale deposits.

So while Putin continues to push the envelope in Ukraine, his belligerence today is endangering his own country’s long-term energy portfolio, and that’s no small thing—the Russian government relies on oil sales for 44 percent of its budget.

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  • Duperray

    Please continue to dream, amigos….

  • Ernst Bloefeld

    Russia is a technological idiot in the oil and gas business. Without the west it cannot lift oil or gas at the rates it must maintain. So we need to tighten up these sanctions and make workaday Russians reject and replace Putin.

  • Jacksonian_Libertarian

    “including plays in the increasingly ice-free Arctic and in Siberian shale deposits.”

    Ice-free really? I guess you suck at the teat of environmentalist beliefs of “Global Warming”. For your information the Arctic Ice sheet is 80% larger this year than last year and much thicker as well. The Ocean’s aren’t rising, and the climate isn’t getting warmer even though that would be a good thing for mankind. There is no scientific consensus, and all of the models that predicted “Global Warming” have failed in the face of no warning for the last 17 years.

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