Fuel prices leap as firms seek cut in Russian gas imports
Companies and European governments are looking to reduce their reliance on Russian gas imports amid fears that Vladimir Putin’s regime could retaliate to sanctions by reducing supplies.
Brent crude, the global benchmark oil price, rose as much as 10% to $117 a barrel, a high not seen since 2013, as increasing numbers of western companies stopped buying Russian oil.
UK gas prices jumped by 38% to more than 400p per therm — more than ten times higher than a year earlier — and spiked as high as 463p, almost breaching the all-time highs set before Christmas.
Europe relies on Russia for about two-fifths of its gas imports, or more than a third of its gas needs.
President of the EU Commission Ursula von der Leyen said: “We are preparing in case of retaliation by Russia. In particular, we are working to diversify our energy supplies and doubling down on renewables. Our resolve is stronger than ever.”
Companies are now considering a cut in gas they import from Russia, while Britain – which has no direct pipeline imports – is exploring ways of blocking LNG supplies from Russia.
This ‘self sanctioning’ action is seen by some analysts as necessary to avoid Russia taking the initiative by starving Europe of supplies.
Germany’s economy minister, Robert Habeck, claimed yesterday that his country was prepared for the potential for Russia to stop gas exports.
Rory Stewart, the former UK government international development secretary, said at the weekend: “The world must now take the extreme measure of full sanctions on Russian oil and gas exports — the one thing that will truly hurt Putin and his allies,”
Analysts at Stifel suggested in December that if all Russian supplies to Europe were cut off, gas prices could hit £10 a therm — more than double the previous record — and warned that there would be “power rationing through rolling blackouts”.
Fears over potential disruption contributed to a surge in European gas prices yesterday, taking British prices with them to near-record highs of more than 460p a therm.
The list of companies now suspending or cancelling operations in Russia now ranges from the energy and automotive industries to the fashion and drinks sectors.
Fashion chain ASOS and the manufacturing group JCB are among the latest to suspend business. Exxon Mobil is exiting its Russian oil and gas operations valued at more than $4 billion.
Ford is suspending its joint-venture operations in Russia, while Burberry has paused all shipments to Russia “until further notice”.
Coca-Cola temporarily stopped production at its plant in Kyiv on the 24 February and evacuated its employees.
Others pulling out, reducing or suspending operations include Abrdn, Apple, Boeing, BP, Centrica, Diageo, Jaguar Land Rover, KPMG, Shell and Weir Group.
Access denied to insurance market
The UK government announced today that Russian companies in the aviation or space industry will be prevented from making use of UK-based insurance or reinsurance services directly or indirectly.
These further economic sanctions aim to limit the benefits Russian entities receive from their access to the global insurance and reinsurance market.
Through Lloyd’s and the London Market, the UK is a world leader in these sectors of the global insurance market. In taking such action, the UK is demonstrating its commitment to apply severe economic sanctions in response to Russia’s invasion of Ukraine.
The UK Government will bring in legislation to prohibit UK based insurance and reinsurance providers from undertaking financial transactions connected with a Russian entity or for use in Russia. Further details of the legislation will be available in due course.
Coupled with similar actions by the EU, this move aims to further isolate Russia’s economy from the international financial system.