Russia's invasion of Ukraine is having a profound impact on global energy markets, governance, and policy, without precedent since Iraq's invasion of Kuwait in 1990.
In addition to the great humanitarian crisis, lives lost and destruction in Ukraine, the immediate result for energy markets has been higher prices, more volatility and a sustained period of uncertainty that threatens the global economy.
In response to the invasion, several major energy consuming nations immediately imposed severe non-energy sanctions on Russia and revised long-term policies for energy security. There was some impact on Russia's exports of energy in March, according to preliminary data, and market analysts expect the sanctions to progressively reduce exports in the coming months.
Russia's largest customers for oil, gas and coal have initiated drastic measures to reduce their reliance on Russian energy over the short and long term
On March 8, the European Commission proposed "an outline of a plan to make Europe independent from Russian fossil fuels well before 2030, starting with gas, in light of Russia's invasion of Ukraine."
The new policy could reduce EU demand for Russian gas by two thirds before the end of 2022, it said. To date, the EU has imposed five packages of increasingly severe sanctions on Russia as the conflict has deepened, with the most recent package adopted on April 7 including a ban on Russian coal imports by August 2022.
Canada banned imports of Russian oil on February 28 and on March 8, the United States banned the import of all Russian fossil fuels. The UK will also phase out imports of Russian oil by the end of 2022.
On March 25, the United States and European Commission formed a task force to reduce Europe's dependency on Russian energy, affirming their resolve to terminate EU dependence on Russian fossil fuels by 2027. The task force will increase US LNG supplies to Europe, permit new US LNG export facilities, and upgrade European energy storage, among other measures, according to a White House statement.
The impact of the invasion on global efforts to accelerate the transition to net zero is a source of concern. Europe has announced more aggressive targets for its Green Deal in the wake of the invasion, but the effect will likely be uneven globally. Higher energy prices do not encourage switching to lower carbon energy sources such as renewables in Europe and gas in Asia, where production of coal reached a new record high in 2021, for example.
As global energy markets and governance rebalance and realign, the IEF continues to facilitate dialogue between producers and consumers, promoting energy security, market stability, transparency and just and orderly transitions. The IEF continues to support member countries in their efforts to address climate change by reducing greenhouse gas emissions and halting methane leaks from the energy industry.
The IEF was born in a previous period of turmoil during the aftermath of the fall of the Berlin Wall and the first Gulf War. Thirty years on, as global institutions are once again tested by conflict, market turmoil and global uncertainty, the IEF continues to facilitate dialogue between producers and consumers to ensure the world energy market serves the needs of humanity.