The western world has placed many sanctions on Russia and its economy. However, Russia holds major leverage over Europe; it has oil and Europe needs it (and may just do a ‘deal’).
Tensions rise in Eastern Europe, as the western world hits Russia with new sanctions. Late last month, President Obama and the European Union imposed sanctions in hopes of deterring President Putin from further aggression and putting an end to his support of Ukrainian separatists.
The aim of previous sanctions was to focus on specific individuals and businesses, while the newest ones are aimed at major pillars of the Russian economy. The oil industry is a major target, as Russia has become the world’s largest oil producer and it accounts for a large portion of the Russian economy.
However, the sanctions against Russia do not target the country’s natural gas sector or its state-owned Gazprom, as about one-third of Europe’s gas supplies come from Russia. Last year, Gazprom exported 162 billion cubic meters of gas to Europe.
The escalations in oil sanctions have the potential for major price hikes for Europe, especially since the winter season approaches, which is the peak gas consumption period. If Russia cuts off gas to Europe, then many nations will be scrambling to find alternative gas suppliers and it will inevitably drive up prices.
Also, President Putin signed a $20 billion oil deal with Iran to mitigate western oil sanctions. The deal will see the two nations cooperate on the production and sale of oil, and Russia will help develop Iran’s energy infrastructure and equipment.
via Zero Hedge http://ift.tt/1oteWVK Tyler Durden