Commentary: The war in Ukraine is changing energy geopolitics

WASHINGTON: Russia’s war against Ukraine will change the landscape of global energy and its geopolitics in profound ways. Pieces of this terrain have already begun shifting.

As the world’s largest combined exporter of oil and gas, Russia has direct energy relationships with more than two dozen European nations, as well as China, Japan, South Korea, Vietnam and others. If coal exports are added, a dozen more countries, including India, are relevant. Russia has used these exports for political leverage since Soviet times.

But invading Ukraine in violation of international law has made Russia a pariah. Its energy customers are not just concerned about sanctions; most are rethinking their reliance on Moscow itself. They see supermajors like BP, Shell, Equinor and ExxonMobil exiting Russia, potentially abandoning billions of dollars in assets, after decades of investment.

Other Russian relationships may also be in trouble. Since 2016, Moscow has partnered with Organization of the Petroleum Exporting Countries (OPEC), the global oil producers’ cartel, to control world oil supply and prices against competition from US shale production. This so-called OPEC+ partnership has had some success – but now, with sanctions forcing Russia into financial isolation, its future is uncertain.

The most pressing issue is Europe, Russia’s main market. Russian President Vladimir Putin clearly believes his country’s exports are too important to sanction and make Russia’s energy sector too valuable to attack. In my view, he is, at best, partly right.

This is because, besides the exodus of international oil firms, there has been a mass withdrawal of investor support for Russia’s own energy companies. This suggests the private sector is doing some of the work of sanctions on its own. In any case, Putin’s strategy will fail for other reasons as well.

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