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Gas prices to keep rising after sanctions
Governments in the West are currently imposing sanctions on Russian individuals and businesses operating in EU countries, including the UK. Most recently have been the Phase Three sanctions, currently imposed by the European Union. These sanctions are aimed at specific sectors of the Russian economy, for instance banning future sales of military hardware (although that in itself has been a subject of controversy here in the UK), further controls on the sale of other sensitive technologies and restricting the ability of Russia’s state banks to reach out to global financial markets.
Of specific interest here, is the targeted focus on the energy market, the real crux of the economic relationship between the EU and Russia. In effect, energy supply has usually been the ball tossed about between the sides contesting this game. Russia is one of the main suppliers of energy, and especially gas, to EU states... and the pipelines run through Ukraine. In the past, Russia has quite literally turned off the tap to these supplies, and therefore stands accused of controlling supply and demand. In effect, they are using energy prices as a political tool and tactic.
So, the EU’s move has been to impose these further sanctions. Russia’s immediate response is to accuse the EU of doing America’s bidding, adding that such sanctions threaten to exert upward pressure on the price of energy supplies, something that concerns all businesses at a time when energy is already a huge expense. Russia and the EU are tied together, and certainly it looks like the sanctions will ultimately affect both sides, although it’s hard to say who will take the biggest blow. Some analysts feel Russia will come off worse. Others say this attrition might drag both sides back into recession.
The Russian Foreign Ministry recently put out a statement which read that: ‘This is a thoughtless, irresponsible step. It will inevitably lead to an increase in prices on the European energy market.’ We will closely monitor the situation to see, longer term, what affect this tragic situation will ultimately have on energy prices.