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sraeli Prime Minister Benjamin Netanyahu announced Wednesday that Israel has approved a $35 billion natural gas export agreement with Egypt, calling it the largest gas deal in the country’s history.

Valued at 112 billion shekels, the agreement will see 130 billion cubic meters of natural gas exported from Israel’s offshore Leviathan field to Egypt through 2040. Deliveries will be carried out by U.S. energy giant Chevron, which operates the field alongside Israel’s NewMed Energy Partnership and Ratio Oil Exploration.

Netanyahu said in a televised statement that the deal would strengthen Israel’s position as a regional energy power and contribute to stability in the Middle East. He added that the agreement ensures gas will also be sold domestically at favorable prices for Israeli consumers. About half of the proceeds are expected to go to Israel’s state treasury.

Egyptian authorities have not issued an official confirmation of the agreement.

Deal follows months of political tension

Reports of the agreement had circulated for months amid diplomatic strains between Israel and Egypt. Israeli media previously reported that Netanyahu had delayed approval of the deal amid Israeli allegations—denied by Cairo—that Egypt violated the 1979 peace treaty by increasing military deployments in the Sinai Peninsula.

The agreement expands an existing gas export arrangement signed in 2019. Israeli Energy Minister Eli Cohen, who had earlier opposed the deal’s terms, stood alongside Netanyahu during the announcement and said he now supports the final agreement.

Egypt has played a key mediating role during the war in Gaza and the U.S.-brokered ceasefire reached in October, while also criticizing Israel’s military offensive that has caused widespread destruction in the enclave.

Israel discovered significant natural gas reserves in the Mediterranean Sea in the early 2000s and began exporting gas nearly a decade ago, first to Jordan and later to Egypt. The latest agreement further deepens energy cooperation between the two countries despite ongoing political tensions in the region.

(Source: Anadolu Agency and the Associated Press)

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s global gas demand is predicted to increase in 2024, geopolitics again plays a decisive role. The north hemisphere is almost halfway through the winter and extreme colds have already severely affected some parts. The U.S. just experienced a deep freeze with snowstorms offering scenes resembling science fiction movies. In another major gas demand spot, severe weather created chaos and caused Northern Europeans to stay at home. And here is the bad news: lower temperatures are expected to continue throughout February. In other words, winter is not over yet for 2024.

The gas market in 2023

With anxiety resulting from the Russia-Ukraine War affecting the global supply chain as a whole, global gas demand increased by just 0.5% in 2023. Although the U.S., African, and Asian gas demand driven by China increased, Europe experienced lower than expected winter demand. The mild winter weather helped a number of countries, especially in Europe, to pass the season smoothly.

Balanced demand across continents and increased power generation from both renewables and nuclear energy sources sparked the slight increase in global gas demand. Even though LNG prices were still above before pandemic levels, they decreased by more than half.

Immediately after the European Union allied with the U.S. and other major economies to impose sanctions on Russian energy products, the Kremlin reacted by cutting the gas flows to Europe. Although the cut did not last long, limited amount of gas started to flow again. Consequently, the increase in prices pushed EU industries to decrease manufacturing capacity or even end the production process. The limited pipeline gas supplies made the EU rush to increase its LNG imports, especially from the U.S. and Russia.

Yet, despite the fact that LNG imports were increased to offset Russian pipeline gas imports, the overall gas demand of Organization for Economic Co-operation and Development (OECD) Europe declined by 7% thanks to higher winter temperatures and the deindustrialization of European countries.

Asia, on the other hand, was home to increased natural gas demand. Led by China and India, the region’s overall gas demand was 2.5% higher than 2022. China’s loosening COVID-19 measures brought power and industrial demand up and boosted demand about 7%, or 12 billion cubic meters (bcm). As a result, the country once again became the world’s top destination for LNG.

Unsurprisingly, the EU’s rush to have a bigger share in the global LNG market and China’s resumed economic activities created tighter supply globally and more investment decisions were accepted compared to the previous year in the undersupplied gas market. The liquefaction capacity attracted record high investments: the 60 bcm capacity approved in 2023 by the EU was more than the capacity of the entire previous decade.

In addition, as the Russian attitude towards the EU resulted in questioning the reliability of pipeline gas, investments towards LNG regasification projects were also increased in 2023 relative to 2022. Project approvals in European states were among the highest, and European countries are expected to raise the total regasification capacity by 50 bcm by 2025. Yet, Asia was again home to the world’s largest project approvals: in a single year, the total amount of approved LNG projects amounted to a capacity of almost 100 bcm—and most of the projects were in China.

Gas market in 2024: Between a rock and a hard place

Geopolitics is continuing to affect the global energy markets. Heading into its third year, the Russia-Ukraine War continues to have adverse effects on the gas markets. As of February 9, the amount of pipeline gas exports by Russia to Europe is greater than the equivalent amount for the same period of the previous year. Still, however, it is 80% lower than that of 2021.

Although the EU member states were better prepared and gas storages were almost full before the winter season, gas demand remains  high and reliable suppliers are still significant for Europe.

As European gas firms rush to guarantee long-term LNG contracts with mostly American exporters, there was a surprising move from the Biden administration. Biden signed a presidential act to suspend the new project approvals to export LNG. While the administration did this as a result of climate activists’ harsh criticisms, there are doubts about whether the country can protect its newly obtained “world’s largest LNG exporter” title and supply enough gas for hungered European states.

What is more, since the extreme winter weather conditions continue across the United States, domestic gas demand is expected to rise. U.S. firms may be stuck between having to choose between feeding the domestic market and exporting overseas.

Since last October, another geopolitical event has been affecting the global energy markets: Israel’s attack on Gaza. After Israel declared war against Hamas, Iran-backed Houthis began to attack tankers belonging to Israel and its allies, especially British and U.S. ships, in the Red Sea. Although this is not the first time Houthis attack tankers or oil and gas infrastructure in the region, the timing of the attacks pose a serious threat to the global energy supply chain.

Many of the largest shipping firms and hydrocarbon corporations, including Maersk and BP, have diverted their routes to longer and costlier ones creating higher destination prices for importers. Of course, higher destinations charges mean higher oil and gas prices in both domestic and international markets, and have the potential to affect the supply chain as a whole. Every single increase in gas prices could lead to incremental increases in the prices of residential electricity and heating.

Added to the above, according to the latest forecasts of the International Energy Agency (IEA), the global natural gas demand is expected to increase by 2.5% in 2024 as a result of harsher weather conditions and increased industrial activities especially in developing countries. Furthermore, it is important to draw attention to the fact that the power sectors’ gas demand is even less predictable since the amount of electricity generated from intermittent renewables is ambiguous. Although it is expected that the natural gas to be produced in global markets will be slightly more—about 0.60%—than the natural gas that will be consumed, geopolitical developments will continue to pose a real threat to the meeting of supply and demand.

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en months after the Ukraine war broke out, Western countries led by the U.S., the EU, and the UK decided to limit Russian oil and gas revenues to weaken its war machine. On December 2, the G7 and Australia agreed on a $60 per barrel price cap on Russian seaborne crude oil. And on December 19, the EU energy ministers enacted a gas price cap. The decisions were argued hard as the former directly targeted Russia while the latter did not explicitly do so. What is a price cap, and what do the G7 and the EU aim to achieve through it? What are the prospects of the EU’s objectives, and will they be successful?

The price cap is a mechanism that sets a maximum price that oil and gas suppliers are able to charge their consumers. The aim here is to regulate suppliers, not hydrocarbon producers, the EU argues. Yet, in the Russian case, it is the Kremlin acting as the producer and the supplier of oil and gas. Thus, Russia’s hydrocarbon revenues are the target. The price cap applied by the G7 and Australia allows operators from participant countries to transport Russian oil to third countries if the price remains below the $60 per barrel cap. Although the EU previously banned the maritime transport of Russian crude oil as of December 5, 2022 and oil products as of February 5, 2023 to third countries, the new decision permits shipowners and insurance companies to continue to earn money from shipping Russian oil. Undoubtedly, Greek shipowners benefit the most in this case since they conduct more than 50 percent of Russian oil shipments, while Russians and Chinese follow the Greeks with lesser shares, 20 percent and 6 percent respectively.

The energy ministers of EU member states agreed on a gas price cap on December 19. The cap will be triggered when gas prices on the Dutch TTF exceed €180 per megawatt hour for three consecutive working days and if they are higher than global gas prices by more than €35 per megawatt hour for the same period. Their aim was to control prices while ensuring the security of the gas supply. Undoubtedly, harming the Russian budget via gas revenues to stop the Ukraine war is also an unspoken desire since the EU is also importing LNG from Russia. Starting on February 15, 2023, the mechanism will be valid for a year. The Czech presidency led the process, and Poland, from the very beginning of the war, pushed hard to convince other EU members to take measures against the Russian aggression.

Yet, whether the price cap mechanism fully prevents the imports of Russian oil in Europe or elsewhere in the West remains a big question. As Moscow started to discount the Urals and its other benchmarks, Asian countries’ appetite for oil began to be fed by cheaper Russian crude, and they became the leading beneficiaries of Western sanctions. Before the Ukraine war broke out, from January 2021 to February 2022, China, for instance, imported about 590,000 barrels of Russian crude oil per day – between March and December 2022, the imports increased to 857,000 barrels per day.

India, another example, has been importing Russian crude at record levels and then processing it in refineries to procure petroleum products. These products are not only sold to the domestic market, but there are also buyers from Western countries. According to the data from market insiders, after the beginning of the Ukraine war, India began to import higher amounts of Russian crude. Although the imports were zero in February 2022, they reached almost one million barrels a day in June and continued so.

In December 2022, about 25 percent of India’s crude oil imports were from Russia, and in January 2023, India’s imports of Russian crude reached more than 1.5 million barrels a day. No one thinks that all the imported oil is marketed at the national level. This is similar to what Iran and Malaysia do. The U.S.-sanctioned Iranian oil is marketed through Malaysian refineries: they buy Iranian crude and then sell it as petroleum products to the world markets after refining.

Moreover, the Kremlin’s decision to limit gas flows to Europe in response to the EU’s ban on Russian coal and crude has pushed European importers to buy more Russian LNG. In 2022, European countries imported around 17 million tons of Russian LNG, which was 20 percent more than the 2021 volumes.

Still, indicators show that Russian oil revenues are going down, especially since June 2022. Although Russian oil is still flowing through the global market, the Kremlin is making less money from its oil due to its compulsive discounts. The Russian oil export revenues hit the highest for 2022 at $21.5 billion in March and then recorded the lowest in December at $12.6 billion. The most marketed Russian benchmark, Urals, was traded at around $50 per barrel when Brent was above $75.

Meanwhile, revenues are predicted to decrease more as the G7 and the EU have been discussing another price cap for Russian petroleum products compatible with the bloc’s ban starting on February 5. Yet, it is commonly believed that neither Europe nor Russia would be the real victims of the energy war between the West and Russia. Rather, the import-dependent and less-developed countries are expected to hurt the most as prices fluctuate more. Meanwhile, Russia continues to sell its oil to non-European markets, and Western countries began importing their oil needs from the Middle East and the Americas.

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his winter will be harsher for Europe as concerns for energy supply and prices grew considerably with the Kremlin’s decision to cut off natural gas supplies via the Nord Stream 1 pipeline. The pipeline has the single largest gas transmission capacity, about 50 billion cubic meters annually, and directly links Russian gas to Germany. Russian gas supplies via Yamal had already been stopped in the first quarter of 2022 and there is almost 70% decrease in gas flows through Ukraine transit. Europe now needs to find alternatives and it has to rush.

Kremlin’s Revenge

As of September 5, Russian natural gas giant Gazprom cut off gas supplies through the Nord Stream 1. However, the way the decision was declared was as remarkable as the decision itself, since the announcement did not come from the company but rather directly came from the Kremlin. Spokesperson Dmitry Peskov told reporters that sanctions imposed on Russia and its companies are the primary reason for interfering in the gas supply and that gas flow would continue only if Western states, including Germany and the UK, lift or reduce their sanctions.

In August, Gazprom reduced gas through Nord Stream 1 more than once by citing technical problems arising from a gas turbine seized by Canada when it was undergoing routine technical maintenance. The Canadian authorities first refused to send the turbine back as the Canadian government had imposed sanctions on Russia. Then, Germany accused the Kremlin of not providing gas even though the turbine was sent back. In the last days of August, gas flows decreased to 20% of total capacity. In the first days of September, the pipeline transfers were completely stopped.

A Harsher Winter Is at the Door

Europe has already begun to experience an above-average cold autumn. Especially in the mornings, heating demand has risen above the 30-year average, which can be read as a hint of a harsh winter ahead. Meanwhile, in early September, gas storage levels were above expectation standing at beyond 85%. According to Gas Infrastructure Europe, most of the importers of Russian gas still have high storage levels compared to previous years; however, early cold weather could result in earlier than expected depletion of these storage reserves.

Energy Crisis Index as of September 28, 2022. Source: Bloomberg

Moreover, even though the price of gas is mostly set by demand, the level of non-gas-fired power generation also directly impacts gas prices. Considering that the drought on the continent is almost the worst in 500 years, hydropower generation decreases to lower levels. Drought caused reduced nuclear power output as well, as water is an indispensable part of electricity generation from nuclear power.

In September, the share of hydropower and nuclear power in the total electricity generation of the EU was about 12% and 20% respectively compared to 15% and 25% in the same month of the previous year. Although power generation from renewables is higher in the same month of this year (11% compared to last year’s 9%), natural gas is also being used more to generate power (22% compared to last year’s 17%). Thus, Europeans must immediately lower both the heating and electricity demand if they want to spend the winter in warmth.

Europe’s de-industrialization

Natural gas is not only used in power generation and heating—it is a unique commodity for the industry. From steel to chemical companies, gas is a significant part of the manufacturing process. Skyrocketed gas prices and weak supply have already pushed some of Europe’s largest manufacturers to cut down production. Temporary layoffs are predicted to be bearable, but industries that employ tens of thousands of workers may not survive in the coming years. The steel industry, for instance, employs 330,000 people across Europe and contributes about 83 billion euros to the economy. Its shutoff may not only result in increased unemployment and decreased GDP, but also in increased dependency on steel producers abroad.

Fertilizer producers also weaned away from natural gas supplies as a result of high gas prices. Fertilizer production capacity has already decreased by two-thirds in Europe and more is expected to come as winter approaches. This not only poses a threat to the production of fertilizers but to the whole agriculture sector.

Some industries began to substitute their gas needs with petroleum products, diesel being one of them. Yet, diesel supply is also risky since Russia is one of the largest diesel suppliers and the EU plans to ban imports of petroleum products as of February 2023.

Bad luck or myopia?

Larger Europe, led by the EU, has long been trying to decrease its dependency on imported energy products. The first big challenge Europeans faced was the 1973 oil crisis when Europe’s vulnerability due to its dependency on Middle Eastern oil was exposed. OPEC (Organization of the Petroleum Exporting Countries) embargoes first doubled and then tripled oil prices, pushing prosperous European economies into two-digit inflation, increasing trade deficit, and eventually causing a deep economic crisis. Yet, the European governments did not take investing in fossil fuel industry seriously and instead continued importing their energy needs.

In 2000, the EU was still dependent on imported energy resources: more than half of the union’s energy needs were met by imported energy products, and according to a document published by the EU Commission, this figure had the potential to rise to 70% in 2020 if nothing was done. The EU’s overall energy import dependency was almost 60% in 2020 with 66% of consumed natural gas and 93% of oil being imported. Although the EU had the power to interfere in internal market and environmental policies, the absence of a common energy policy affected the union adversely.

The European Union is in a tight corner. This is both due to the climate change and its effects, and to the security of energy supply. At a time when the world was struggling with agreeing on measures to tackle climate change, the COVID-19 pandemic and the following outbreak of the Russia-Ukraine War severely impacted global energy markets and supply chains.

Energy prices, led by oil, decreased to record-low levels as the pandemic pushed states to lockdown. But in the second half of 2021 with the increase in economic activities following the weakening of the pandemic, demand and prices began to go up. And the Russia-Ukraine war made everything even harder.

The EU’s Ambitious Task: Being a “Pioneer” in Global Climate Action

The EU has a complicated relationship with fossil fuels. The union owes its establishment to one of the mostly used and dirtiest fossil fuels: coal. At the same time, debates on how to reduce the use of fossil fuels have been going on since the 1960s. As climate change was brought to the global political agenda, the European Union positioned itself as one of the major actors encouraging the international community to take measures.

The executive arm of the union, the European Commission, tried hard to form a union-level climate policy after the signing of the UN Framework Convention on Climate Change (UNFCCC). In fact, the union’s effort was more tangible when the Bush administration withdrew from the Kyoto Protocol in 2001. The U.S. pullback created an opportunity for the EU and it redefined itself by setting a super ambitious goal: being a “pioneer” in global climate action.

In 2009, the EU made its first ever ambitious move, namely the European Union Climate Change and Energy Package directive, which is famous for its 20-20-20 targets, passed by the EU. The directive sets out to (1) reduce greenhouse gas emissions by 20 percent from the 1990 levels; (2) improve energy efficiency by 20 percent; and (3) raise the share of renewable energy resources in total energy consumption by 20 percent. The package was followed by a number of climate and energy policy proposals prepared by the commission, and now the EU has the “European Green Deal,” which ambitiously sets the target for Europe to be the first net-zero emission continent.

The Russia-Ukraine War: A Wake-up Call for the EU

The Russia-Ukraine war just entered its sixth month. Since the beginning of the war, the EU, as the largest market of Russian energy, has been trying to spin its Russian energy imports around. However, a first-time global energy crisis faces the union. The policymakers already passed six sanction packages and only the last two could cover energy embargoes, which will be in force for coal imports as of August and seaborne oil starting from the end of the year, while no gas embargo has yet to be agreed upon. The EU’s greatest weakness is its supply of natural gas.

Since Russia’s annexation of Crimea in 2014, the EU has aimed to reduce its dependency on Russia, especially for natural gas imports. Yet, it has become even more dependent on Russian gas supplies due to Russia’s geographical proximity and rich energy resources, as well as the union’s views of natural gas as a “transition fuel” to a low-carbon economy. Many European governments planned to increase the use of gas to compensate for phasing out their dirtier coal usage. Nevertheless, Putin’s Russia is no longer a reliable energy supplier for the EU.

Time for an Immediate Climate Act, But How?

The effects of climate change are getting worse, and the Mediterranean region is suffering more and more. The average temperatures in the summer season have risen to record-high levels all around Europe. From London to Paris, most weather forecast bodies have announced the temperature will hit above 40 degrees Celsius for the first time ever. Not surprisingly, the extreme heat waves pose a real threat. Hundreds of heat-related deaths and many wildfires have already been reported in recent months. As one of the leading polluters and victims of climate change, the EU now has to take immediate action. However, the Russian invasion of Ukraine and the global energy crisis have shackled the union, and its recent effort to greenwash fossil gas seems unlikely to succeed.

Natural gas, or fossil gas as some Europeans call it, is used to heat homes, generate electricity, run factories, and produce fertilizer. It is also a transition fuel for economies to become low-carbonized, but at the end of the day, it is a fossil fuel and emits greenhouse gasses. The EU has to reduce its gas consumption to slash its emissions by 55% by 2030 compared to the 1990 levels and become the first carbon-neutral continent in the world by 2050.

Moreover, coal and natural gas are not the only energy resources that the Europeans plan to rid themselves of. Many EU members led by Germany and Austria set to phase out nuclear power as well. Although nuclear power provides zero-emission electricity and a sustainable power supply, the environmental and safety concerns of the Europeans affect their positions. Yet, the union needs gas and nuclear power more than ever, and the Russian gas disruptions are pushing the EU to take measures.

 Labeling Fossil Gas and Nuclear Power as “Green”

On June 6, 2022, the EU made a historical decision: members of the European Parliament voted on a controversial plan to label fossil gas and nuclear power under the “green taxonomy,” which is a classification system establishing a list of environmentally sustainable economic activities. The system is planned to create security for investors and help companies become more climate friendly. By adding natural gas and nuclear power to the green taxonomy, the MEPs agreed to call them “green,” thus considering gas and nuclear powers as eligible for sustainable investment funding from 2023. The act is now waiting for the council’s backing, and if this happens, member states should quickly provide their approval.

 EU Member States’ Reaction

Germany, which is heavily dependent on gas, and France, which benefits most from nuclear power, are expected to accept the act first to make their transition to a low-carbon economy smoother by taking advantage of green finance. States that use more coal, like Poland, also support the act since it foresees investing billions of euros into the new gas-fired power plants that would replace the coal-fired ones.

Yet, the decision is controversial. Eight member states are against it, and they have diverse motivations for doing so. States like Luxemburg and Austria do not support the act and argue that only a few member states have environmentally secure nuclear reactors and only they would develop new ones. Others, such as Denmark and Spain, claim that this move would violate the union’s position on global climate action since it will pave the way for increasing its emissions over the tolerable limits. Ultimately, more Europeans are thinking that the EU’s aim to be the first carbon-neutral continent by 2050 is once again hampered by national interests.

After Russia’s decision to place the Sakhalin-2 oil and gas project under its jurisdiction on July 1, on Thursday, July 7, Russian lawmaker Pavel Zavalny said that the same happening to the Sakhalin-1 project was the obvious next move. “When sanctions are being introduced, when the companies are effectively unable to take an active part in a project, this creates various risks for us and we are forced to make such decisions,” Zavalny said.

Amid Western sanctions following Russia’s invasion of Ukraine, Russian President Vladimir Putin signed a five-page decree on June 30, seizing full control of the Sakhalin-2 gas and oil project.

The project is one of the world’s largest LNG projects with an output of 12 million tons and accounts for about 4% of the world’s liquefied natural gas production, mainly supplying Asian countries such as Japan, India, China, and South Korea.

A backdoor move to nationalization?

Although the Kremlin spokesman Dmitry Peskov denied that the changes put in effect with the new decree amounted to nationalization, it endows the Russian government with control of all shares, rights, obligations, and property currently held by the Sakhalin Energy Investment Company before its transfer to a new firm.

According to the decree, a new firm, namely Gazprom Sakhalin Holding, is to be created to take over all rights and obligations of the Sakhalin Energy Investment Company, and only a Russian legal entity will be able to buy shares in the new company. It also indicates the government will control any sale or transfer of shares therefore deciding whether foreign partners will have a chance to hold their stakes.

The consortium consisted of Russian majority state-owned Gazprom (with 50% plus one share), Shell (with 27.5% minus one share), and Japanese trading companies Mitsui (12.5%) and Mitsubishi (10%).

While Gazprom keeps its stake in the new firm, within a month’s time other partners are to ask for their stakes from the Russian government. If not permitted, the government will sell their stakes and keep the earnings in an account to be sent to the shareholder or used to repay unspecified damages under the production-sharing agreement.

According to Russian newspaper Kommersant, the decree justifies the move on the grounds that the Russian state invested in the plant, and in production and transport infrastructure, and that these facilities become the property of the state under the terms of the production-sharing agreement.

According to Bloomberg, European gas prices more than doubled since the start of the year, while Asian prices increased by about a third. This implies that due to prices, LNG from the U.S. favors Europe over Asia. The competition for shipments is high while the global LNG market is expected to remain tight for the foreseeable future.

Kremlin spokesman Dmitry Peskov said Russia would not halt LNG deliveries from Sakhalin-2 and added that the future of other projects would be determined on a case-by-case basis.

What is the future of the Sakhalin-1 project?

Regarding the Sakhalin-1 project, Peskov stated that no decision had been taken on its future. Russia’s Rosneft, ExxonMobil, Japan’s SODECO, and India’s ONGC Videsh are partners in the Sakhalin-1 fields. ExxonMobil has announced it will pull out of the project in March. ONGC Videsh hopes to remain in the project and that any takeover will not impact its 20% stake.

After the departure of ExxonMobil’s technical specialists, the project faces serious problems, such as inability to fully operate the equipment, resulting in oil production decrease. On July 7, Russian Deputy Prime Minister Yury Trutnev said that oil output at Sakhalin-1 had fallen from 220,000 to just 10,000 barrels per day (bpd).

High energy prices and potential supply shortages, already fueling inflation, remain another global by-product of the Russian invasion of Ukraine and the resulting friction with the West.

The Russian military aggression against Ukraine launched almost two months ago has clearly signaled a change in the traditional world order and triggered the unprecedented reaction of the Western coalition led by the U.S. The ongoing conflict between Russia and Ukraine has left the global energy market uncertain, threatening to cause severe energy shortages and oil prices exceeding $110 per barrel.

Since the Russian intervention in Ukraine kicked off, numerous sanction packages have been imposed on Russia, hitting mostly financial institutes and state-owned companies. This resulted in Western countries’ consolidation, and the collective refusal of Russia-related transactions and import of Russian natural gas, oil, and coal.

Whereas the U.S. and UK-led Western coalition gathered to support Ukraine politically, economically, and military/technically, some EU countries are at loggerheads over demands for an immediate blockade on Russian oil imports, joining the international financial sanctions, and condemning Moscow’s actions locally.

For example, Hungary and Germany seemed hesitant to ban Russian oil and gas imports, citing that “measures targeting Russia’s lucrative oil and gas exports were a red line.” However, under  harsh criticism and pressure by the U.S., Germany suspended Russia’s Nord Stream 2 project and has released $3.2 billion to acquire floating liquefied natural gas import terminals in order to move away from dependence on Russian gas. Unlike their Western partners, the Baltic states and Poland took a more rigid stance, joined the anti-Russian front, and declared that they fully stopped importing Russian gas and coal.

In addition to Europe, the Gulf countries and the post-Soviet region, and China and India are determined to keep their criticism at a low level and simultaneously not to cross red lines in their relations with Russia. During the UN Security Council vote condemning the Russian invasion of Ukraine, one of the United States’ most important partners in the Gulf, the United Arab Emirates (UAE), ignored Washington’s pleas and abstained from condemning the invasion. Meanwhile, Saudi Arabia  shied away from backing the Biden administration and severing relations with Russia.

Obviously, the U.S. seeks to isolate Russia more by pushing the EU and other states to ban all Russian imports and rely on alternative energy suppliers, that is the Gulf monarchies. However, they were shocked when OPEC+ countries, including the UAE, Saudi Arabia, and Qatar, after a 13-minute-long meeting, refused to increase their production and decided to stick to a deal previously agreed upon between member states. This is mainly because the Gulf states do not want to jeopardize relations with Russia over Ukraine, as they see Moscow as an essential linchpin for the oil-producing coalition.

As the second-biggest oil exporters after Russia, Kazakh oil producers are using the Caspian Pipeline Consortium (CPC) pipeline to send their barrels to the Black Sea, and Russia’s Transneft for exports via the Baltic Sea and the Black Sea. They are now seeking to reroute their flows away from the traditional private pipeline running to the Black Sea due to Russia’s economic isolation and the initial sharp fall of the Russian ruble.

On the other side of the post-Soviet region, the South Caucasus states also abstain from vocal criticism of the war in Ukraine and have joined energy sanctions against Russia. While Georgia and Armenia made it clear that they do not have plans to join energy and economic sanctions, energy-rich Azerbaijan held several talks with the EU as an alternative energy supplier for a possible increase in exports to Europe soon.

As a regional state with options for political maneuvering and economic tools, Russia signed a new document on allied cooperation with Azerbaijan days before the intervention in Ukraine, thus seeking to neutralize it beforehand. Nevertheless, the document did not prevent Azerbaijan from dispatching three humanitarian aid convoys worth around 12 million euros and instructing the national oil company (SOCAR) to provide free fuel to Ukrainian fire engines and ambulances.

It is evident that the current anti-Russia sanctions will hit Russia’s already stagnating economy hard and will result in a gradual decrease in the energy monopoly in Europe. On a political level, more countries will likely join the anti-Russia group by banning Russian goods and fossil fuels, steadily shifting to green energy and renewable sources. In light of the Ukraine invasion, EU member states are already seeking to accelerate the transition to renewables to meet their electricity and energy needs fully.