Putin's Threat of Natural Gas Gut Off

Yesterday, Vladimir Putin threatened to cut off natural gas to Ukraine within days.  As Ukraine has a large pipeline hub from which the gas travels into Ukraine and then out to Eastern Europe and the rest of Europe, everyone could be under pressure.  As I mentioned in my December 3, 2014 blog, Russia could and would use this leverage as a weapon of sorts.  Putin also mentioned that any cutoff could impact Europe. 

As I mentioned in that blog, winter is here and Russia has cutoff natural gas supplies to Ukraine in 2006 and 2009.  According to the 2013 BP Statistical Review:

• Russia is the number 2 producer of oil at 12.9% of global production (behind Saudi Arabia at 13.1%); and
• Russia is the number 2 producer of natural gas at 17.9% of global production (behind the US at 20.6%).

Oil prices have dropped from a high in July 2014 of approximately $112/bbl Brent to approximately $60.90/bbl Brent (today), a drop of 45.6% in 7 months. 

Why Europe should be concerned:

• Ruble has been crushed over the past 12 months,
• Oil price down 45.6% in the past 7 months,
• Economic sanctions continue,
• Rising tensions with the West over the 11 month uprising in Ukraine.