If Western sanctions lead to Russia’s oil exports being completely cut off, the world can expect the international energy market to collapse, a senior figure at the US rating agency Fitch said on Tuesday.
Speaking in an interview with Russian news agency TASS, Dmitry Marinchenko explained that the current spike in oil prices would be mitigated if there is no further escalation around Ukraine. However, a further ramping up of tensions could be a disaster.
Marinchenko is the senior director of the Natural Resources Group at the US rating agency.
“The geopolitical surplus of the price of oil now is about US$15 per barrel,” Marinchenko explained. “If everything goes according to the calmest scenario, which implies no further escalation, minimal sanctions that do not affect the oil and gas sector, and the freezing of the conflict, this geopolitical surplus will come to naught.”
In a more pessimistic scenario, if the escalation around Ukraine intensifies even further, and Western nations impose severe sanctions on the Russian energy sector, Marinchenko suggested that the price of oil could easily exceed US$100 per barrel. According to the expert, this will result in an energy crisis.
The analyst from Fitch explained the worst-case-scenario forecast by explaining that no other nation can replace Moscow’s export of natural resources.
“Russia’s share in the world oil market is more than 10%. There is nothing to replace it. There is little free capacity, especially considering the gradual recovery in demand,” he clarified.
On Monday, following Russia’s decision to recognize the independence and sovereignty of the breakaway Donetsk and Lugansk People’s Republics, the US, EU, UK, Canada announced that they would impose new sanctions on Moscow. The White House, however, emphasized that the measures are unlikely to target Russia’s energy exports.
Washington also said that the initial package of anti-Russian measures would not include the restriction of Moscow’s access to SWIFT, the world’s leading international financial transactions s