OPINION: Russian President Vladimir Putin used the Victory Day celebrations in Moscow this week as an opportunity to bang the drum of war, although he calls it by another name.

Russian strategy now seems concentrated on securing territory in the east of Ukraine, but the shock waves from the conflict are shaking the foundations of the global economy, especially the energy sector.

Western attempts to cripple Russia’s oil and gas sector are not going to produce results overnight.

The European Union last week proposed banning all imports of Russian oil by the end of this year, but left some leeway for compliance by Hungary, Slovakia and the Czech Republic.

This is mainly because of their greater reliance on Russian oil and gas, but it is also about politics.

Hungarian Prime Minister Viktor Orban has tetchy relations with the EU and is considered to be Putin’s closest European ally.

He said the EU oil boycott would be an “atomic bomb” for Hungary’s economy and has said that even a longer 2024 target would “destroy” security of supply.

The more the US and EU toughen their line on reducing their Russian oil and gas fix, the more demand can increase on scarce alternative supplies.

Western oil majors have cut their links to Russia and ended technology transfers, but Moscow is selling more crude to China and India.

Critics wonder if sanctions ultimately mean giving Russia more cash for less commodity.

Higher prices have fired up profits among the oil majors, even as they write off huge investments in Russia.

But all this is driving up global energy prices and inflation during a cost-of-living crisis in some nations.

World leaders need no reminding about how a scenario of rising living costs and falling subsidies can result in social and political unrest, as well as geopolitical tensions between nations.

These risks were highlighted this week by consultancy firm Verisk Maplecroft in a report showing that middle-income emerging market countries such as Brazil, Argentina, Egypt, Tunisia and Senegal are facing the most acute risks of civil unrest due to rising food and energy prices.

The long-term success or failure of the European strategy to escape over-reliance on Russia will depend on developing renewable power and sustainable alternative fertiliser industries more rapidly.

In the short term, however, alternatives sources of oil and gas must be sought and this hard fact can be seen in the sudden flurry of oil sector mergers and acquisitions activity in a formerly quiet market like Norway.

Countries such as Poland have started building liquefied natural gas import terminals and buying up North Sea gas assets.

Poland highlighted the threat from Russia in 2017 and its early drive for energy independence is paying off.

A new Baltic Pipe gas transport link from Norway to Poland is expected to open this October, while an inter-connector with Lithuania is to be constructed.

Germany, France and Italy are among those EU states pressing ahead with new floating LNG import terminals that offer quick — but not cheaper — alternatives to Russian pipeline gas.

Victory Day it may be for Putin, whose approval ratings in patriotic, but now isolated, Russia remain high. But, so far, it is also a defeat for energy consumers.

(This is an Upstream opinion article.)

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