What Happens to Europe’s Energy If Russia Acts?

A Russian construction worker speaks on a mobile phone during a ceremony marking the start of Nord Stream pipeline construction in Portovaya Bay some 170 kms (106 miles) north-west from St. Petersburg, Russia on April 9, 2010. (AP)
A Russian construction worker speaks on a mobile phone during a ceremony marking the start of Nord Stream pipeline construction in Portovaya Bay some 170 kms (106 miles) north-west from St. Petersburg, Russia on April 9, 2010. (AP)
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What Happens to Europe’s Energy If Russia Acts?

A Russian construction worker speaks on a mobile phone during a ceremony marking the start of Nord Stream pipeline construction in Portovaya Bay some 170 kms (106 miles) north-west from St. Petersburg, Russia on April 9, 2010. (AP)
A Russian construction worker speaks on a mobile phone during a ceremony marking the start of Nord Stream pipeline construction in Portovaya Bay some 170 kms (106 miles) north-west from St. Petersburg, Russia on April 9, 2010. (AP)

Fears are rising about what would happen to Europe’s energy supply if Russia were to invade Ukraine and then shut off natural gas exports in retaliation for US and European sanctions.

The tensions show the risk of Europe’s reliance on Russia for energy, which supplies about a third of the continent’s natural gas. And Europe’s stockpile is already low. While the US has pledged to help by boosting exports of liquefied natural gas, or LNG, there’s only so much it can produce at once.

It leaves Europe in a potential crisis, with its gas already sapped by a cold winter last year, a summer with little renewable energy generation and Russia delivering less than usual. Prices have skyrocketed, squeezing households and businesses.

Here’s what to know about Europe’s energy supply if tensions boil over into war and Russia is hit with sanctions:

Will Russia cut off gas supplies to Europe?
No one knows for sure, but a complete shutoff is seen as unlikely, because it would be mutually destructive.

Russian officials have not signaled they would consider cutting supplies in the case of new sanctions. Moscow relies on energy exports, and though it just signed a gas deal with China, Europe is a key source of revenue.

Europe is likewise dependent on Russia, so any Western sanctions would likely avoid directly targeting Russian energy supplies.

More likely, experts say, would be Russia withholding gas sent through pipelines crossing Ukraine. Russia pumped 175 billion cubic meters of gas into Europe last year, nearly a quarter of it through those pipelines, according to S&P Global Platts. That would leave pipelines under the Baltic Sea and through Poland still operating.

“I think in the event of even a less severe Russian attack against Ukraine, the Russians are almost certain to cut off gas transiting Ukraine on the way to Germany,” said former US diplomat Dan Fried, who as State Department coordinator for sanctions policy helped craft 2014 measures against Russia when it invaded and annexed Ukraine’s Crimea peninsula.

Russia could then offer to make up the lost gas if Germany approves the new Nord Stream 2 pipeline, whose operators may potentially face US sanctions even though a recent vote to that effect failed. German officials also have said blocking operation of the pipeline would be “on the table” if there’s an invasion.

Interrupting gas supplies beyond the Ukrainian pipelines is less likely: “If they push it too far, they’re going to make a breach with Europe irreparable, and they have to sell the oil and gas someplace,” Fried said.

What can the US do?
It’s a major gas producer and already is sending record levels of liquefied natural gas, or LNG, by ship worldwide. It could only help Europe a little.

“We’re talking about small increases to the size of US exports, whereas the hole that Europe would need to fill if Russia backed away or if Europe cut Russia off would be much larger than that,” said Ross Wyeno, lead analyst for Americas LNG at S&P.

The Biden administration has been talking with gas producers worldwide about whether they can boost output and ship to Europe, and it has been working to identify supplies of natural gas from North Africa, the Middle East, Asia and the US

The administration also is talking with buyers about holding off.

“Is there some other country that was planning to get an LNG shipment that doesn’t need it and could give it to Europe?” said Amy Myers Jaffe, managing director of the Climate Policy Lab at Tufts University, mentioning Brazil or countries in Asia.

Over the past month, two-thirds of American LNG exports went to Europe. Some ships filled with LNG were heading to Asia but turned around to go to Europe because buyers there offered to pay higher prices, S&P said.

Is there enough liquefied gas worldwide to solve the problem?
Not in the event of a full cutoff, and it can’t be increased overnight. Export terminals cost billions of dollars to build and are working at capacity in the US.

Even if all Europe’s LNG import facilities were operating at capacity, the amount of gas would only be about two-thirds of what Russia sends via pipelines, Jaffe said.

And there could be challenges distributing the LNG to parts of Europe that have fewer pipeline connections.

If Russia stopped sending just the gas that goes through Ukraine, it would take the equivalent of about 1.27 shiploads of additional LNG per day to replace that supply, said Luke Cottell, senior LNG analyst at S&P. Russia also could reroute some of that gas through other pipelines, reducing the need for additional LNG to about a half-shipload per day, he said.

Is Russia already supplying less gas?
Russia has been fulfilling its long-term contracts to supply gas to Europe, but it’s been selling less on the spot market and hasn’t been filling the storage containers it owns in Europe, experts say.

“It’s already happened. It’s not theoretical,” Jaffe said.

Russian cutbacks to spot gas supplies have contributed to sharply higher natural gas prices in Europe. They went as high as 166 euros ($190) per megawatt hour in December, more than eight times their level at the start of 2021. Prices have fallen to under 80 euros per kilowatt hour as more LNG arrives.

But consumers are feeling the crunch in higher electric and gas bills. European governments are rolling out subsidies and tax breaks to ease the financial stress on households.

Is there impact in the US?
As the US ramped up LNG exports, domestic prices of natural gas also rose. More than 10% of gas produced in the US last year was exported, said Clark Williams-Derry, analyst at the Institute for Energy Economics and Financial Analysis.

US gas prices spiked by more than 30% in the last week of January, primarily because of an approaching winter storm in New England, Williams-Derry said. But prices also were affected by tighter US supplies amid uncertainty over Russia, he said.

“Russia is disturbing European gas markets, with the US talking about exporting basically the next ‘Berlin airlift’ for natural gas to Europe,” he said.

If the US pushes for increased LNG exports, prices at home would likely rise, Williams-Derry added.

Ten Democratic senators, led by Jack Reed of Rhode Island and Angus King of Maine, recently urged the Energy Department to study the effect of higher exports on domestic prices and pause approvals of proposed terminals. They said they understood “geopolitical factors” give rise to sending more gas.

“However, the administration must also consider the potential increase in cost to American families,” the senators said.



EBRD Cuts Growth Outlook Again as Iraq, Lebanon, Ukraine Hit by War Pressures

FILE - A worker collects engine oil as he works at a degassing station in Zubair oil field, near Basra, Iraq, Saturday, March 28, 2026. (AP Photo/Leo Correa, File)
FILE - A worker collects engine oil as he works at a degassing station in Zubair oil field, near Basra, Iraq, Saturday, March 28, 2026. (AP Photo/Leo Correa, File)
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EBRD Cuts Growth Outlook Again as Iraq, Lebanon, Ukraine Hit by War Pressures

FILE - A worker collects engine oil as he works at a degassing station in Zubair oil field, near Basra, Iraq, Saturday, March 28, 2026. (AP Photo/Leo Correa, File)
FILE - A worker collects engine oil as he works at a degassing station in Zubair oil field, near Basra, Iraq, Saturday, March 28, 2026. (AP Photo/Leo Correa, File)

Growth is slowing across a range of emerging market nations, with economies in Iraq, Lebanon and Ukraine hamstrung by the effects of war, the European Bank for Reconstruction and Development said on Thursday.

High energy prices, rising borrowing costs and issues ranging from drought in Europe to the ongoing closure of the Strait of Hormuz are combining to depress economic growth, the EBRD regional economic outlook found.

Across the 41 economies it covers, the EBRD expects growth of 2.5% this year, 0.6 ⁠percentage points below ⁠its June forecast and its second consecutive downgrade.

"What's a cause for concern is that there are multiple pressure points, from diesel to cost of wheat to cost of borrowing," EBRD chief economist Beata Javorcik said, according to Reuters. "Pressures are building up, and there are considerable downside risks to our forecast."

The sharpest downgrades were for Iraq and Lebanon. The EBRD expects Iraq's economy to contract ⁠by 12% this year after the closure of the Strait of Hormuz curbed oil exports, while Lebanon is expected to contract 5% as conflict with Israel weighs on economic activity.

The EBRD also lowered its forecasts for Ukraine, owing to intensifying Russian attacks, and for Türkiye, where it said persistent inflation pressures were forcing tighter financing conditions.

Price pressures, meanwhile, were less intense than the EBRD had feared. Average inflation in EBRD regions stabilized at around 6%, the report found, and energy accounted for roughly a quarter of the headline figure.

But wheat prices globally are ⁠up roughly ⁠30% since February as Black Sea attacks cut Ukrainian exports to the lowest level since April 2022, Javorcik said.

This could cut Ukrainian wheat, seed oil and metals exports by $5.5 billion this year, equivalent to 2.5% of GDP, as low water levels on the Danube and Russian attacks on rail links limit alternative export routes.

"This of course has big implications for economic activity in Ukraine," Javorcik said, adding that, if farmers cannot export their crops, it could harm their ability to buy fertilizer for the next planting season.

Elevated wheat prices threaten food-importing economies, particularly countries such as Egypt that heavily subsidize bread and grain products.

Russia and Ukraine combined account for roughly a quarter of global wheat exports.


As 5% Treasury Yields Lose Shock Value, Investors Start Worrying about 6%

US Department of the Treasury (Reuters)
US Department of the Treasury (Reuters)
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As 5% Treasury Yields Lose Shock Value, Investors Start Worrying about 6%

US Department of the Treasury (Reuters)
US Department of the Treasury (Reuters)

For years, 5% on the benchmark US 10-year Treasury yield was viewed as the point at which global financial markets would start hitting turbulence. That threshold is beginning to look less like a ceiling and more like a waypoint.

This month's breach of 5% - something that has happened only briefly in recent decades - has forced investors to contemplate an unsettling question: What if 6% is the new number that should be keeping them awake at night? Reuters reported.

The latest move above 5% has not lasted long enough yet to properly test that theory. But it has always been a psychological marker rather than an automatic tripwire, according to BlueBay Asset Management's head of market strategy, Mike Bell.

"People think of it as if there's a magic number for Treasury yields at which it becomes a problem, (but) it's a relative number, not an absolute number," Bell explained.

What matters is how Treasury yields compare with other key investment metrics, particularly the earnings yield on stocks. Bell says that relationship ‌is now approaching ‌an inflection point, potentially setting the stage for an equity selloff.

History offers some guidance. MSCI's main world ‌stocks ⁠index halved in value ⁠the last time the 10-year Treasury yield broke 5%, which was just before the global financial crash. It suffered a similar slump less than a decade earlier when a near 6.8% spike helped pop the dotcom bubble.

JP Morgan's analysts say one of the reasons why the pain-point might now be above 5% again is a "key structural shift" in the global economy, with AI, healthcare and services playing a bigger role. Many of those firms are spending and expanding, regardless of the level of borrowing costs.

That means "the traditional interest-rate channel looks materially less binding" and the "breaking threshold" of stock markets may be "meaningfully higher, potentially in the 5.5%-6.0% range", JP Morgan said, referencing the views of some of the major investors at one of its most recent conferences.

PROFOUND REPRICING

In ⁠the $29-trillion Treasury market, which anchors pricing for virtually all financial assets, a shift from 5% to 6% ‌would represent a profound adjustment in the global cost of capital.

A 6% Treasury yield ‌would imply either significantly higher inflation expectations, growing concerns about US fiscal sustainability, a conviction that interest rates will remain elevated for years - or a mix of ‌all three.

Federal Reserve policymaker Austan Goolsbee said this week that he didn't know whether markets would react differently to a lengthier period of ‌5% yields than they had in the past.

Paul Jackson, Invesco global head of asset allocation research, said investors focus on Treasury yields for a simple reason: Treasuries represent the world's risk-free benchmark and at above 5%, investors can lock in the highest returns on US bonds since 2007.

Jackson's own calculations show world stocks start to drop when the 10-year yield has traded at an average of 4.72% for 12 months and then rises.

That tipping point remains some way off ‌for now - the 12-month average is currently around 4.34% - but Jackson said he was already dialling back on stocks and switching some money into government bonds to cash in on the juicy yields.

"If Treasury ⁠yields keep rising then there ⁠is a risk that the stock market is lower in 12 months' time," he said.

EMERGING QUESTIONS

Emerging markets, which have enjoyed something of a hot streak in recent years, are often among the first casualties when US yields surge.

Higher Treasury returns tend to strengthen the dollar and make dollar-denominated assets more attractive. That sucks capital away from EM economies and can tip hard-up countries into crisis if the cost of servicing their dollar-denominated debt spirals.

Data on investment flows shows last week saw the biggest exodus from EM bond funds in months, with billions also withdrawn from equity funds. Issuance of emerging-market sovereign debt has also been notably lighter than usual this month.

"It's not an optimal picture for EM," said Alison Shimada, Head of Total Emerging Markets Equity, Allspring Global Investments, although she stressed that for now nothing was going "horribly wrong" and therefore remained "constructive".

Perhaps the biggest risk is psychological.

Once investors start asking whether 6% is attainable, the debate shifts beyond a temporary spike in yields. It becomes a broader reckoning with the possibility that the era of abundant liquidity and ultra-cheap money has ended, forcing global asset prices to adapt to a permanently higher cost of capital.

Premier Miton CIO Neil Birrell said while stock markets were showing no sign of collapsing right now, that might be because investors weren't yet plugging in 5%-plus yields into their longer-term profit forecasting models.

"The markets look fine until everyone re-runs their valuation models," Birrell said. "Ultimately, the numbers are the numbers and they've got to come through."


East Pipes Signs $12.27 Million Contract with Aramco

One of the manufacturing facilities of Eastern Pipes Company in Saudi Arabia. (Company photo)
One of the manufacturing facilities of Eastern Pipes Company in Saudi Arabia. (Company photo)
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East Pipes Signs $12.27 Million Contract with Aramco

One of the manufacturing facilities of Eastern Pipes Company in Saudi Arabia. (Company photo)
One of the manufacturing facilities of Eastern Pipes Company in Saudi Arabia. (Company photo)

Saudi Arabia's East Pipes Integrated Company for Industry has signed a new five-month contract with Saudi Aramco to manufacture and supply steel pipes, with the total value exceeding 46 million riyals ($12.27 million), including value-added tax, the company said on Thursday.

The contract was formally signed on Tuesday, Sept. 22, 2026, after the contract award procedures were completed on the same day.

The company said the contract is expected to have a positive financial impact, which will be reflected in its financial results for the fourth quarter of fiscal year 2026-2027.

The company said there were no related parties involved in the transaction and that the contract was concluded under customary commercial terms and conditions, in line with transparency and corporate governance requirements.