More has gone horribly, horribly wrong in European-Russian affairs in the last week than in the 25 years I’ve been following them. It’s…impossible to sugar coat this. Energy breakdowns are inevitable, and most likely imminent.
- Energy shortages could be accidental. Over the weekend, Russian artillery accidentally (?!) struck one of the Chernobyl hazardous material storage facilities. Oil and natural gas pipes, pumps and depots are not hardened.
- Breakdowns could be intentional, with Moscow brandishing its energy power like a cudgel as it has done to great effect at so many points these past two decades.
- Sanctions could trigger a payments failure; the Russian central bank is now under the broadest, deepest financial sanctions in history.
- The disruption could be due to insurance; Lloyd’s of London was – rightly – spooked when Russian missiles struck non-Ukrainian vessels in the Black Sea, and is likely to cancel all maritime insurance in the area. Oil tankers included.
- It could happen because of the Turks. Ankara has already invoked the Montreux Treaty, enabling it to halt the sailing of vessels through the Turkish Straits. That’s the route used by exports from southern Russian and northeastern Kazakh oil fields.
- The Ukrainians could blow up their own pipes. Once the Russians fully occupy Ukraine, Ukrainian partisans will savage the infrastructure the Russians depend upon, both in Ukraine and neighboring Belarus.
Pick your poison, but the end result is the same: Russian oil and natural gas will fall offline. Some 1.5 million barrels of daily oil shipments and 3 billion cubic feet of natural gas are directly in the line of fire at this very moment, with triple that at risk in-region.
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