Russian forces on Thursday launched their long-feared attack on Ukraine, sending shock waves through financial markets and raising fears about the ramifications for gas supplies around the world.
Russian President Vladimir Putin declared the beginning of a special military operation in order to demilitarize the area of Ukraine.
Russian forces are said to have fired missiles at military control centers. NBC News reporters on the ground heard and saw explosions in other cities.
Specific reports from the country are difficult to confirm, as the crisis in Ukraine is changing rapidly.
Ukrainian Foreign Minister Dmytro Kuleba said on Thursday that Putin had launched a full-scale invasion of the country.
European gas prices jumped on the news of the invasion, while international benchmark crude futures surpassed $100 a barrel for the first time in three years.
While Western governments probably will exempt energy transactions from sanctions, the new restrictions will force many traders to be very cautious in handling Russian barrels.
They said that gas transiting Ukraine will likely be disrupted, affecting supplies to several central and eastern European countries, and raising gas prices in Europe.
The United States, Canada, Britain, the European Union, Australia and Japan were among the countries that imposed sanctions against Russia this week. A second wave of measures is expected soon.
The region's deep dependence on Russian gas prompted a rethink after Germany halted a highly controversial project.
The invasion of Ukraine by Russia is one of the worst security crises in Europe in decades. It is expected to have far-reaching implications for the global economy, given that Russia is one of the world's largest oil producers.
Russia has been accused of disrupting gas supplies in order to leverage its role as a major energy supplier to Europe.
This was the subject of a rare rebuke from the International Energy Agency, which called on Russia to increase gas availability to Europe and ensure storage levels were filled to adequate levels during a period of high winter demand.
The state-owned gas company, Gazprom, said it has fulfilled its contractual obligations to customers.
Energy analysts are worried about the risk of a full supply disruption to the EU, which gets 40% of its gas via Russian lines.
There would be profound public health and economic consequences if Russia cut off its gas supplies.
Europe is in a better position than it was at the start of winter, according to analysts at Wood Mackenzie. The longer-term outlook is not certain.
Kateryna Filippenko said things could get worse if Russian exports to Europe were disrupted.
Europe would have to pull every lever in the energy system to keep the lights on, reducing gas burn and cranking up mothballed nuclear and coal plants.
A worker adjusts a pipeline valve at the Gazprom PJSC Slavyanskaya compressor station, the starting point of the Nord Stream 2 gas pipeline, in Ust-Luga, Russia, on Thursday, Jan. 28, 2021. Nord Stream 2 is a 1,230-kilometer (764-mile) gas pipeline that will double the capacity of the existing undersea route from Russian fields to Europe — the original Nord Stream — which opened in 2011.Europe would not have a chance if all Russian gas were cut off.
In the event of a long-term disruption, gas inventory couldn't be rebuilt through the summer. The situation of gas storage being close to zero for next winter would be catastrophic. Prices would be very high. It would be necessary for industries to shut down. Inflation would go up. The European energy crisis could cause a global recession.
There are no alternatives to Russian volumes of oil and gas, that do not involve far higher prices, according to TroyVincent, senior market analyst at Dtn Markets.
He said that sanctioning Russian energy exports to Europe and the rest of the world would mean destruction of economic growth and government budgets.
The sanctions on Russian oil and gas would lead to higher energy prices in the world.
China is the only major nation that could benefit from such sanctions, as they would likely soak up discounted Russian volumes.
Stewart Glickman, energy equity analyst at CFRA, said in a research note on Wednesday that he expected sanctions of Russia to have significant consequences for energy markets.
Russia is a huge supplier of natural gas to Europe and is also a huge producer of fossil fuels.
It is our opinion that cutting off the spigot would cause pain in all directions, since Russia's national budget is reliant on commodity exports and fossil fuel demand.
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