Russia - Ukraine Crisis: How the Leading Natural-Gas and Oil Exporter is Leveraging its Stake in the Energy Market

Written By Ria Saraswat (W’25); Edited by Juliette Santulin (W’25)

Russia’s recent invasion of Ukraine has sparked controversy across the globe. As international powers ally in support of Ukraine sanctions aimed at urging the Kremlin to abandon its invasion of Ukraine heavily target Russian banks and money transfers. However, these sanctions shy away from heavily impacting the energy sector. Current sanctions are estimated to reduce Russia’s GDP growth by 1-2% according to William Jackson, Chief Emerging Markets Economist at Capital Economics. The U.S. and its Western allies must balance their personal interests and economies with the larger implications of the Russia-Ukraine crisis. 

Georgi Kantchev and Joe Wallace’s most recent article titled “Russia’s Energy Dominance Ties West’s Hand in Ukraine War” highlights the risk of damaged pipelines and their impact on the flow of gas and subsequent prices. Gas prices have been on the rise lately, and are currently 6 times higher than they were a year ago. In response to this tremendous increase, President Biden has made his intentions with Russia clear: he explained that while he is imposing economic sanctions, he “will do everything in [his] power to limit the pain the American people are feeling at the gas pump.” Additionally, according to the Wall Street Journal’s Patricia Kowsmann and Ian Talley, the Biden administration has reaffirmed that officials are selecting particular Russian banks to remove from the Swift network to minimize any disruption to energy markets. 

All this is key because Russia is the world’s top natural-gas producer and a prominent player in the oil market. The country provides roughly 40% of Europe’s natural gas, making it difficult for countries condemning the Ukraine invasion to economically punish Russia without adversely impacting their own economies. With the Russian state owning the majority stake in Gazprom PJSC, a gas producer criticized for using gas supplies as a geopolitical tool, Russia’s fossil-fuel companies are often regarded as “arms of the Russian state.” The Kremlin’s hold on the energy market has kept economic repercussions at bay, but only time will tell the impact the Russia-Ukraine crisis will have on a global scale.