Western Sanctions Against Russia's Energy Sector and Russia's Response

Energy industry sanctions, which form the core of economic sanctions against Russia, began in earnest after Russia annexed Crimea in 2014. Following the outbreak of war in Ukraine in February 2022, the US and EU significantly strengthened sanctions on the energy industry, which is the backbone of Russia's economy and accounts for more than 50% of its exports. Russia is not only Europe's No. 1 supplier of energy resources, but also occupies a very important position in world energy trade, accounting for 20% of total global trades of energy commodities. Political conflicts between major exporters and importers such as Russia, the US and Europe have greatly increased uncertainties in the energy market. This is having a huge impact on the world economy. As a result of the sanctions, the Russian energy industry has been forced to change its structure. If the previous goal was to develop the energy industry and further strengthen its position as the largest exporter of natural resources, the current goal has to be revised to minimize losses caused by sanctions. In the future, Russia is expected to increase exports to the Asian market, focusing on cooperation with China and India. It is expected that costs will increase because productivity and efficiency decrease as access to foreign technology and equipment becomes difficult. The policy to localize Western equipment and technology subject to sanctions will be pushed more strongly, but this will inevitably cost considerable money and time. At present, Russia's exports of energy regenerate maintain a high export value due to high prices, although the export volume has decreased. It is difficult for Europe to fully replace Russian energy resources in the short term. For the time being, due to increased exports to Asia and relatively high energy commodity prices, Russia's energy resource exports are expected to remain high for a considerable period of time. The Russian energy industry will play an important role in the Russian economy and international energy market for some time, but its current share will decline more rapidly than previously anticipated. In an unprecedented and unpredictable situation, the Russian energy industry is facing a previously unimaginable challenge to maintain the status quo or to minimize the decline in production and exports.