Putin acknowledges that Western sanctions have started to hurt Russia’s oil and gas industry

• President Vladimir Putin on Thursday said Western sanctions are disrupting the Russian energy sector.
• Putin’s comments come as the European Union looks to decrease its dependence on Russian oil and gas.
• But Putin warned that those aiming to shut out Russian suppliers could face consequences. 

Russian President Vladimir Putin on Thursday acknowledged that Western sanctions have already begun to upset Russia’s energy industry and warned that further global disruption to the country’s oil sector could have “extremely painful” consequences for those aiming to stymie Russia’s economy.

Putin made the comments during a government video meeting from his home near Moscow on Thursday, according to media reports. The president said banks from “unfriendly countries” were straining Russian energy exports by delaying the transfer of payments. 

The president’s admission comes as many of Russia’s biggest energy customers in the European Union contemplate banning Russian oil and gas deliveries to punish Russia for its war in Ukraine. The massive trading bloc has resisted the move so far because of the large costs it would incur for many European countries, but officials are growing uncomfortable continuing to finance Moscow amid the conflict in Ukraine.

While the EU has not yet issued a full ban, some of the sector’s funding and technology have been targeted by sanctions and some trading partners are avoiding Russian energy altogether. Both the US and Canada have banned Russian oil and gas imports, leading to staggering gas prices.

But amid the West’s attempts to decrease reliance on Russian energy sources, Putin warned that those aiming to shut out Russian suppliers would face consequences. The president on Thursday stressed that there is a scarcity of natural gas on the global market, and predicted that if Europe looks to other countries to provide energy imports, the effects will be felt in people’s standard of living.

“There is no reasonable alternative to Russian gas in Europe,” he said, according to The New York Times.

Russia’s crude is already being traded at a massive discount on the global market, as plummeting demand has led to a drop in crude-oil production that is impacting the entire Russian energy supply chain, according to The Wall Street Journal. Gas and oil sales made up 45% of Russia’s federal budget in 2021, the outlet reported, and economists are warning that unemployment, inflation, and a recession are in Russia’s near future. 

Putin on Thursday said Russia needs to replace sanctioned equipment with substitutes and reorient gas sales from European buyers to the Asian market. But doing so could take years, The Journal reported, due to underdeveloped shipping networks and pipelines. 

But even despite Putin’s acknowledgment of hardship, Russia is expected to rake in roughly $9.6 billion from energy sales in April, according to estimates from the country’s finance ministry. Even amid sanctions, Russia has enough customers to keep the sector afloat. India has bought at least 13 million barrels of Russian oil since the war started, according to Reuters, and China remains a buyer as well.