What’s the impact of sanctions on Russia’s energy sector?

World Today

Russian politicians, banks and state businesses have officially said sanctions won’t affect them. In the energy sector, the message has been that sanctions will hurt Europe and the U.S. a lot more than they will Russia. But many Russian economists and politicians worry that the opposite may be true, as Tom Barton reports.

Impact of sanctions on Russia’s energy sector

Impact of sanctions on Russia’s energy sector

Russian politicians, banks and state businesses have officially been saying that sanctions won't affect them. In the energy sector, the message has been that sanctions will hurt Europe and the U.S. a lot more than they will Russia. But many Russian economists and politicians worry that the opposite may be true, as Tom Barton reports.

Russia is the world’s biggest exporter of natural gas and second biggest of oil.

The state depends on energy for around half its budget revenue, and according to the Energy Information Administration (EIA), European countries account for around 84 percent of Russia’s oil exports and three-quarters of its natural gas exports.

However, while the cars roll by in Moscow running on cheap fuel, some analysts think these sanctions could put the brakes on Russian oil companies. This could hurt the Russian government, given that oil and gas revenues are an important source of income for the country.

Russia’s oil producers are dependent on imported technology to help develop its energy sector. The advanced equipment comes in large part from European and U.S. companies, who will now be denied export licenses if the technology is destined for deep water, arctic or shale oil production in Russia, though this applies only to oil and not gas so far.

EU officials say it is up to Russia to deescalate the situation in eastern Ukraine, adding the sanctions can be lifted or tightened at any moment.