G7 pledges to reduce reliance on Russian energy, calls on OPEC to boost oil output

Group of Seven leaders pledged to take further steps to reduce their reliance on Russian energy imports and called on OPEC to step up oil production March 24 following a round of meetings to ramp up pressure on Moscow over its invasion of Ukraine.

The statement followed back-to-back emergency meetings of NATO, the G7, and the European Council in Brussels attended by US President Joe Biden as Russia's invasion of Ukraine enters a second month.

No immediate decision by EU leaders to curb Russian imports of oil or gas was reached, however, and Brent crude futures lost about 2% in late European trading to price around $117/b.

"We commit to actively support countries willing to phase out their dependency on Russian gas, oil and coal imports," G7 leaders said in a statement. "We call on oil and gas producing countries to act in a responsible manner and to increase deliveries to international markets, noting that OPEC has a key role to play."

"We are taking further steps to reduce our reliance on Russian energy and will work together to this end. At the same time, we will ensure secure alternative and sustainable supplies, and act in solidarity and close coordination in the case of possible supply disruptions," the G7 said.

G7 leaders also agreed to limit Russia's ability to sell its gold reserves to support its currency as they ramp up efforts to block Moscow's ability to evade Western financial sanctions on Russia.

Speaking ahead of a European Council heads of state meeting earlier in the day, Slovenia's Prime Minister Janez Jansa said an EU deal to phase out Russian oil, gas and coal imports to the bloc remains "on the table," but a final agreement could take another month due to ongoing disagreement on the detail among member states Slovenia, one of Europe's most dependent member states in terms of imports of Russian oil and gas, will reiterate its support for an EU move to phase out imports of Russian fossil fuels at a European Council heads of state meeting in Brussels March 24, Jansa told reporters ahead of the meeting.

"Russian gas, oil and coal are on the table [but] this will not happen unfortunately overnight," Jansa said at the meeting which is being attended by Joe Biden. "There is support to do this as soon as possible, this means during next month because otherwise we are just [funding] the Russian war machine."

German opposition

Pressure on the EU to announce some measures to cut its imports of Russian oil and gas have been growing, with member states such as Ireland and Lithuania calling for a ban on Russian oil to ramp up pressure on Moscow.

The latest comments come a day after German Chancellor Olaf Scholz reiterated his opposition to any immediate curbs on EU imports of Russian fossil fuels, warning that any such moves would plunge the region into an economic recession.

Speaking to the Bundestag parliament, Scholz said Germany will continue to look to reduce its dependency on Russian oil and gas, but warned "hasty" action could trigger a recession.

Germany, Europe's biggest economy, is heavily dependent on Russian energy, with about half of its gas and coal imports and more than one-third of its oil imports coming from the country.

The EU imported 155 Bcm of Russian gas in 2021, accounting for around 45% of EU gas imports and close to 40% of its total gas consumption.

Europe was importing about 2.7 million b/d of Russian crude, around a quarter of total imports, and another 1.5 million b/d products, mostly diesel, before the invasion of Ukraine.

Ruble request

At a meeting in Versailles on March 11, EU member states agreed to phase out the use of Russian fossil fuels "as soon as possible" but didn't set a deadline. The European Commission has said it is drawing up plans for the EU to stop importing Russian fossil fuels by 2027.

Asked if he believes any European buyers of Russian oil and gas will pay in rubles as requested by Moscow, Jansa said: "I don't think anybody in Europe knows what rubles look like. Nobody will pay in rubles." Western sanctions targeting Russia's financial sector over the war have tightened the oil market and caused European buyers to seek alternative supplies. Some traders have warned that prices could hit $200/b or more with further hits to Russian oil flows.

OPEC has told the EU that global energy markets would be destabilized if European countries follow through with a threat to ban imports of Russian oil, sources in the producer group said, with traders warning of massive price spikes beyond the surge already seen.

OPEC, which formed an alliance with Russia in late 2016 to manage the oil market, has been intensely lobbied by western countries and major consumers to increase crude output to offset the impact of sanctions imposed over the Ukraine war.

However, it has insisted that the disruptions to the market are not its responsibility to mitigate, and delegates say the bloc remains disinclined to cast aside its production quotas or raise them more aggressively.

OPEC is scheduled to meet with Russia and its nine other allies on March 31 to discuss May production levels.

"The world can't replace Russia's exports," one source said of the group's message to the EU, which was delivered in an online meeting March 16 between Energy Commissioner Kadri Simson and OPEC Secretary General Mohammed Barkindo.