If the standoff with Russia and the West reaches a point where the EU has to completely cut trade with Russia, oil prices could soar above $200 per barrel, sparking a global economic crisis, says Adam Slater, senior economist at Oxford Economics.
Cutting off trade with Russia, the world’s second largest oil
exporter, would create a shortage in global energy supplies,
which would have spillover effects into Europe, Slater told the
Guardian.
“In such a scenario, world oil prices could soar above $200
per barrel and gas prices would also rise steeply,” Slater
told the Guardian.
If Russian energy is banned from Western markets, Slater
estimates that Russia would lose 80 percent of its energy
exports. OPEC producing countries would fill in the market gap.
Major economic downturns are associated with high energy prices.
“Stage three” sanctions- similar to those Iran experienced during
the last decade- would bar the West from all Russia-related
business, including exports.
The EU buys 84 percent of Russian oil exports, and 76 percent of
natural gas exports. About a quarter of European countries
completely rely on Russia for gas or oil supplies.
As of yet, Russia hasn’t halted European gas supplied through
politically unstable Ukraine, but this event itself could trigger
“stage three”, or trade-specific sanctions.
“These would further damage Russia’s economy. Russia’s next
moves remain uncertain but an escalation of the conflict is still
a significant risk which would have potentially negative global
spillovers in particular via the impact on global energy
markets,” Slater said.
The EU hopes that Ukraine and Russia will settle their gas
row by autumn.
The puzzle that still surrounds the shooting down of flight MH17
has unleashed a new wave of accusations against Russia.
Sanctions against Russia have been driven by the US, but Europe
has been more reluctant to follow suit, since its economy is
still fragile, and disruption with a close trading partner could
further destabilize recovery. Russia is the EU’s third
largest trading partner, and the largest economies, Germany,
France, and Italy have some of the strongest ties.
The US just implemented a new round of sanctions, targeting
Russia’s energy, finance, and defense sectors. On Thursday, the
EU will broaden its industry-specific sanctions on Russia, EU
foreign policy chief Catherine Ashton said on Tuesday.
The US sanctions block certain Russian companies from long-term
dollar loans.
Article source: http://rt.com/business/174908-sanctions-russia-global-meltdown/
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