Russia May Lose in Battle With Europe For Energy Leverage

Wednesday, 05 Mar 2014 07:41 AM

By Elliot Jager

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Russia needs to sell its energy resources to Europe more than Europe needs to buy oil and gas from Moscow, The Wall Street Journal reported.

Russia has warned that natural gas prices are likely to rise because Ukraine's special discount negotiated with the ousted government of Victor Yanukovych will no longer be honored. Ukraine owes Russia's Gazprom company about $1.5 billion at the discounted price.

Tensions between Moscow and Kiev could also leave Europe's gas supply unstable. Russia supplies 30 percent of Europe's gas, half of which passes through Ukraine, the Journal said. Germany, Italy, and Britain are most dependent on keeping the gas flowing, the Journal reported.

There are several mitigating factors to Russia's leverage.

The winter is drawing to a close, and Europe and Ukraine have large supplies of gas in reserve storage, the Journal reported.

Overall, Europe is less dependent on Russia for energy than it was a decade ago, according to The Christian Science Monitor.

"Russia's more dependent on Europe as a market than Europe is dependent on Russia as a source of supply," Peter Kiernan, an energy analyst at the Economist Intelligence Unit, told the Journal.

Western Europe buys about 76 percent of Russia's natural gas exports, the Monitor reported. Selling this energy abroad brings in half of the Russian government's revenue.

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