Meeting on the Situation on the Global Oil and Gas Market

V. Putin: Good afternoon, colleagues.

I asked you to gather today so that we could discuss the situation developing on global energy markets and compare notes. I would like to hear your views on the events now unfolding and consult with you on how we should coordinate the efforts of the state and our private companies in light of these developments. In this connection, we will also discuss Russia’s further actions in global energy more broadly, including in view of the worsening situation, as we understand it, in the Middle East.

Russia has repeatedly warned—and I would like to note this at the outset—that attempts to destabilize the situation in the Middle East would inevitably place the global fuel and energy sector under strain, drive up oil and gas prices, restrict supplies of these resources worldwide, and, of course, disrupt long-term investment plans. It appears that this is exactly what is happening.

Today we are seeing logistical problems along hydrocarbon transport routes, and we can see that this is having an extremely negative impact on global production chains, harming industry and, in essence, without any exaggeration, the entire system of international economic relations. Because supply disruptions are followed by other problems of a purely economic nature: inflation rises, and production suffers—not only oil and gas production, but the production of industrial goods as well.

Let me recall that last year around one-third of global seaborne oil exports—some 14 million barrels per day—passed through the Strait of Hormuz. Of that volume, around 80 percent was destined for countries in the Asia-Pacific region. That route is now effectively closed. Oil production dependent on use of the strait risks coming to a complete halt within the next month. It has already begun to decline, while storage facilities in the region are filling with oil that cannot be shipped out at all, or is very difficult or very expensive to ship out.

It is obvious that a complete rerouting of Middle Eastern oil supplies without using the Strait of Hormuz is currently—at least for now—unrealistic. Changing logistics will not only take a long time, but will also require substantial spending on infrastructure, expansion of marine terminals, and so forth. And of course it will entail high political risks, which have not disappeared.

But consumers need oil today. As a result, global oil prices are rising—we can see that perfectly well. In the past week alone they have gained more than 30 percent. I checked today at 05:30 Moscow time, and I think it had already gone through 119—more than 119 dollars per barrel. Then 107, 106, and now, I think, Igor Ivanovich [Sechin] said 103; it is fluctuating somewhere around there at the moment. But the fluctuations continue, and the trend is not toward a decrease, but toward an increase.

A similar situation is developing on the global gas market. Supplies of liquefied natural gas from the Middle East have fallen sharply. Production capacity in the region has declined, and restoring it will take weeks, if not months. It is impossible to offset the lost volumes quickly. As a result, global gas prices are also rising—indeed, in my view, even faster than oil prices.

What I would like to emphasize in this connection is the following. Under current conditions, competition among buyers for energy suppliers—for secure, stable, and predictable oil and gas supplies—is intensifying.

In this regard, of course, I cannot but say—and remind not only the colleagues sitting here in this room, but all of our consumers more generally—that Russian energy companies have always been distinguished precisely by their reliability.

It is clear that the global logistics of the fuel and energy sector [TEK; a standard Russian term for the fuel and energy complex] under the conditions of the continuing conflict in the Middle East will shift in favor of more profitable and more promising markets. At the same time, it must be understood that the current high commodity prices are unquestionably temporary. We all understand this; it is obvious. We must proceed from that assumption, which is why I asked you to gather and consult on how we should coordinate our efforts in the near term.

A change in the balance of hydrocarbon supply and demand will, of course, lead to a new and durable pricing reality. This will inevitably happen. Therefore, it is important for Russian energy companies to use the current moment, including by directing additional export revenue toward reducing their debt burden and their liabilities to domestic banks. Colleagues, I would ask you to pay particular attention to this. I am asking the Government of the Russian Federation and the Central Bank of Russia (CBR) to take this process under control.

Let me emphasize: Russia is, I repeat, a reliable supplier of energy resources. That has always been the case. We will, of course, continue to supply oil and gas to those countries that are themselves reliable counterparties. I mean not only our partners in the Asia-Pacific region, but also states in Eastern Europe such as Slovakia and Hungary. Even now, before this meeting in this broader format, some colleagues informed me that we are increasing supplies to our reliable partners in several regions of the world at once.

At the same time, I would like to remind you that European Union countries plan, from 25 April, to introduce additional restrictions on purchases of Russian hydrocarbons, including liquefied natural gas, up to and including a complete ban on such supplies in 2027. In this connection, the Government has already been tasked with assessing the possibility and advisability of ending supplies of our energy resources to the European market—not waiting until the door is demonstratively slammed in our face, but doing so now and redirecting those volumes from the European market to more attractive destinations and, most importantly, establishing a foothold there.

At present, market conditions are such that if we reorient right now toward those markets that need increased supplies, we can establish ourselves there now—that is, in places where there is stable long-term demand and reliable long-term relationships, in those states that are building constructive business relations with Russia.

Incidentally, I asked you to come in order to consult on all these questions: if European companies and European buyers were suddenly to decide to reorient themselves and offer us stable, long-term cooperation free of political expediency—free from political considerations—then, of course, that would be possible. We have never refused; we are ready to work with Europeans as well. But we need some signals from them that they are ready and also want to work and will provide us with that sustainability and stability.

The Government is also keeping these issues under control. I hope that we will now discuss all these matters with you in substantive terms.

Please, the floor is yours, Aleksandr Valentinovich Novak.