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    Why Are Oil Prices So High and Will They Stay That Way?

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    HOUSTON — Oil prices are increasing, again, casting a shadow over the economy, driving up inflation and eroding consumer confidence.Crude prices rose more than 15 percent in January alone, with the global benchmark price crossing $90 a barrel for the first time in more than seven years, as fears of a Russian invasion of Ukraine grew.Though the summer driving season is still months away, the average price for regular gasoline is fast approaching $3.40 a gallon, roughly a dollar higher than it was a year ago, according to AAA.The Biden administration said in November that it would release 50 million barrels of oil from the nation’s strategic reserves to relieve the pressure on consumers, but the move hasn’t made much of a difference.Many energy analysts predict that oil could soon touch $100 a barrel, even as electric cars become more popular and the coronavirus pandemic persists. Exxon Mobil and other oil companies that only a year ago were considered endangered dinosaurs by some Wall Street analysts are thriving, raking in their biggest profits in years.Why are oil prices suddenly so high?The pandemic depressed energy prices in 2020, even sending the U.S. benchmark oil price below zero for the first time ever. But prices have snapped back faster and more than many analysts had expected in large part because supply has not kept up with demand.Oil prices are at their highest point since 2014.Price of a barrel of Brent crude, the global benchmark, and West Texas Intermediate, the U.S. standard

    Source: FactSetBy The New York TimesWestern oil companies, partly under pressure from investors and environmental activists, are drilling fewer wells than they did before the pandemic to restrain the increase in supply. Industry executives say they are trying not to make the same mistake they made in the past when they pumped too much oil when prices were high, leading to a collapse in prices.Elsewhere, in countries like Ecuador, Kazakhstan and Libya, natural disasters and political turbulence have curbed output in recent months.Understand Russia’s Relationship With the WestThe tension between the regions is growing and Russian President Vladimir Putin is increasingly willing to take geopolitical risks and assert his demands.Competing for Influence: For months, the threat of confrontation has been growing in a stretch of Europe from the Baltic Sea to the Black Sea. Threat of Invasion: As the Russian military builds its presence near Ukraine, Western nations are seeking to avert a worsening of the situation.Energy Politics: Europe is a huge customer of Russia’s fossil fuels. The rising tensions in Ukraine are driving fears of a midwinter cutoff.Migrant Crisis: As people gathered on the eastern border of the European Union, Russia’s uneasy alliance with Belarus triggered additional friction.Militarizing Society: With a “youth army” and initiatives promoting patriotism, the Russian government is pushing the idea that a fight might be coming.“Unplanned outages have flipped what was thought to be a pivot towards surplus into a deep production gap,” said Louise Dickson, an oil markets analyst at Rystad Energy, a research and consulting firm.On the demand side, much of the world is learning to cope with the pandemic and people are eager to shop and make other trips. Wary of coming in contact with an infectious virus, many are choosing to drive rather than taking public transportation.But the most immediate and critical factor is geopolitical.A potential Russian invasion of Ukraine has “the oil market on edge,” said Ben Cahill, a senior fellow at the Center for Strategic and International Studies in Washington. “In a tight market, any significant disruptions could send prices well above $100 per barrel,” Mr. Cahill wrote in a report this week.Russia produces 10 million barrels of oil a day, or roughly one of every 10 barrels used around the world on any given day. Americans would not be directly hurt in a significant way if Russian exports stopped, because the country sends only about 700,000 barrels a day to the United States. That relatively modest amount could easily be replaced with oil from Canada and other countries.A Russian invasion of Ukraine could interrupt oil and gas shipments, which would increase prices further.Brendan Hoffman for The New York TimesBut any interruption of Russian shipments that transit through Ukraine, or the sabotage of other pipelines in northern Europe, would cripple much of the continent and distort the global energy supply chain. That’s because, traders say, the rest of the world does not have the spare capacity to replace Russian oil.Even if Russian oil shipments are not interrupted, the United States and its allies could impose sanctions or export controls on Russian companies, limiting their access to equipment, which could gradually reduce production in that country.In addition, interruptions of Russian natural gas exports to Europe could force some utilities to produce more electricity by burning oil rather than gas. That would raise demand and prices worldwide.What can the United States and its allies do if Russian production is disrupted?The United States, Japan, European countries and even China could release more crude from their strategic reserves. Such moves could help, especially if a crisis is short-lived. But the reserves would not be nearly enough if Russian oil supplies were interrupted for months or years.Western oil companies that have pledged not to produce too much oil would most likely change their approach if Russia was unable or unwilling to supply as much oil as it did. They would have big financial incentives — from a surging oil price — to drill more wells. That said, it would take those businesses months to ramp up production.What is OPEC doing?President Biden has been urging the Organization of the Petroleum Exporting Countries to pump more oil, but several members have been falling short of their monthly production quotas, and some may not have the capacity to quickly increase output. OPEC members and their allies, Russia among them, are meeting on Wednesday, and will probably agree to continue gradually increasing production.In addition, if Russian supplies are suddenly reduced, Washington will most likely put pressure on Saudi Arabia to raise production independently of the cartel. Analysts think that the kingdom has several million barrels of spare capacity that it could tap in a crisis.What impact would higher oil prices have on the U.S. economy?A big jump in oil prices would push gasoline prices even higher, and that would hurt consumers. Working-class and rural Americans would be hurt the most because they tend to drive more. They also drive older, less fuel-efficient vehicles. And energy costs tend to represent a larger percentage of their incomes, so price increases hit them harder than more affluent people or city dwellers who have access to trains and buses.Rising oil and gas prices would pinch consumers, especially the less affluent and rural residents.Jim Lo Scalzo/EPA, via ShutterstockBut the direct economic impact on the nation would be more modest than in previous decades because the United States produces more and imports less oil since drilling in shale fields exploded around 2010 because of hydraulic fracturing. The United States is now a net exporter of fossil fuels, and the economies of several states, particularly Texas and Louisiana, could benefit from higher prices.What would it take for oil prices to fall?Oil prices go up and down in cycles, and there are several reasons prices could fall in the next few months. The pandemic is far from over, and China has shut down several cities to stop the spread of the virus, slowing its economy and demand for energy. Russia and the West could reach an agreement — formal or tacit — that forestalls a full-scale invasion of Ukraine.And the United States and its allies could restore a 2015 nuclear agreement with Iran that former President Donald J. Trump abandoned. Such a deal would allow Iran to sell oil much more easily than now. Analysts think the country could export a million or more barrels daily if the nuclear deal is revived.Ultimately, high prices could depress demand for oil enough that prices begin to come down. One of the main financial incentives for buying electric cars, for example, is that electricity tends to be cheaper per mile than gasoline. Sales of electric cars are growing fast in Europe and China and increasingly also in the United States. More

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    What a Disconnect From Swift Would Mean for Russia

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    A Belgian financial messaging service is once again at the center of an international sanctions fight.WASHINGTON — President Biden has pledged that if Russia invades Ukraine it will face “severe economic consequences,” with the United States likely to unleash a blistering package of sanctions that would effectively cut the Russian economy off from much of the global financial system.The United States has become increasingly reliant on sanctions in the last decade as a way to address diplomatic problems, but directing such tools at an economy the size of Russia’s would come with little precedent. The Biden administration has said that all options remain on the table, suggesting that it could impose an array of sanctions on Russian financial institutions and new restrictions on the exports of American products. But the biggest question among sanctions experts when it comes to inflicting economic pain on Russia is the fate of a critical financial conduit: Swift.In sanctions circles, a move by the United States and its European allies to cut Russia off from Swift has been characterized as a nuclear option. However, doing so is not as simple as it sounds and could yield unintended consequences because of Russia’s size and position in the world economy.“The Russian economy is a different beast,” said Adam M. Smith, who served as a senior sanctions official in the Obama administration’s Treasury Department. “It is twice the size of any economy the U.S. has ever sanctioned.”A Treasury Department spokeswoman said the Biden administration was assessing potential “spillovers” from any sanctions it imposes on Russia and exploring ways to reduce any unintended negative effects. Last week, Biden administration officials met with representatives from U.S. banks to discuss the risks and potential market impacts of sanctions on Russia, including the possible ramifications of cutting off Swift access for entities that had been hit with sanctions.Understand Russia’s Relationship With the WestThe tension between the regions is growing and Russian President Vladimir Putin is increasingly willing to take geopolitical risks and assert his demands.Competing for Influence: For months, the threat of confrontation has been growing in a stretch of Europe from the Baltic Sea to the Black Sea. Threat of Invasion: As the Russian military builds its presence near Ukraine, Western nations are seeking to avert a worsening of the situation.Energy Politics: Europe is a huge customer of Russia’s fossil fuels. The rising tensions in Ukraine are driving fears of a midwinter cutoff.Migrant Crisis: As people gathered on the eastern border of the European Union, Russia’s uneasy alliance with Belarus triggered additional friction.Militarizing Society: With a “youth army” and initiatives promoting patriotism, the Russian government is pushing the idea that a fight might be coming.What is Swift?Officially the Society for Worldwide Interbank Financial Telecommunications, Swift is a Belgian messaging service that connects more than 11,000 financial institutions as they transfer money around the world. It does not actually hold or transfer funds, but allows banks and other financial firms to alert one another of transactions that are about to take place.Swift is a global cooperative of financial institutions that is based in Belgium. It started in 1973 when 239 banks from 15 countries came together to figure out how to best handle cross-border payments.Despite its best efforts to be an apolitical cog in the international financial system, Swift has at times found itself embroiled in diplomatic disputes.Can Russia be booted from Swift?There have been continuing discussions between the United States and its allies in Europe over whether to block Russia’s access to Swift. However, the Biden administration could take that step unilaterally.If the United States decided to levy sanctions on Russian banks, it could then say that Swift was in violation of those sanctions by continuing to let those banks use its system. The Defending Ukraine Sovereignty Act of 2022, which Senate Democrats unveiled this month, would authorize sanctions on providers of specialized financial messaging services, such as Swift, but the Biden administration could also impose such sanctions without the approval of Congress.Cutting a country’s access to Swift is not without precedent.In 2012, Swift expelled as many as 30 Iranian financial institutions, including its central bank, in order to comply with European Union sanctions that were enacted in response to Iran’s disputed nuclear energy program. Services were reconnected after the 2015 nuclear deal, and then cut again in 2018 after the Trump administration withdrew from the pact and resumed sanctions.How would Russia respond to being removed?Russia has faced such threats before. In 2014, when Russia invaded and annexed Crimea, there were calls in Europe to exclude Russia from Swift. Dmitri A. Medvedev, then Russia’s prime minister, said at the time that such a move would be a “declaration of war.” According to the Carnegie Moscow Center, Russian forecasts at the time projected that being cut off from Swift would shrink the country’s gross domestic product by 5 percent.Last week, Nikolay Zhuravlev, the vice speaker of Russia’s Federation Council, told the government-run news agency TASS that removing Russia from Swift would also have economic consequences for European countries, which he said would not be able to receive imports of Russian oil, gas and metals as a result of Russia’s being unable to receive foreign currency.Mr. Smith, the former Treasury official, said the United States and Europe might look for ways to exempt certain Russian sectors, such as energy, from sanctions. However, moves to cut off Russia’s economy could have unintended consequences, such as Moscow retaliating, that could rattle global markets.“They are not without their own cards to play,” he said.A switch to Swift alternativesThe threat of being cut off from Swift might not be as dire as it was in the past.Several countries including Russia have developed their own financial messaging systems that, while less sophisticated than Swift, could allow Russian financial firms to maintain communications with the world. Russia began developing its system in 2014 amid threats of escalating sanctions from the United States.Mr. Medvedev, who is now the deputy chairman of the Security Council of Russia, said last week that the new system was functional and that financial flows would be able to continue within Russia if the country was cut off from Swift. He acknowledged that international financial transfers could be complicated if that happened.“Yes, they will be more difficult, it is obvious, but it won’t be a catastrophe,” Mr. Medvedev said.Some experts on Russia sanctions agree that Western officials are overplaying the potential effects of disconnecting Russia from Swift.“Cutting Russia off from Swift — it won’t be as painful for Russia as Western officials envision,” said Maria Snegovaya, a visiting scholar at George Washington University and a co-author of an Atlantic Council report on U.S. sanctions on Russia.Edward Wong More

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    U.S. Sanctions Aimed at Russia Could Take a Wide Toll

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    The boldest measures that President Biden is threatening to deter an invasion of Ukraine could roil the entire Russian economy — but also those of other nations.WASHINGTON — The most punishing sanctions that U.S. officials have threatened to impose on Russia could cause severe inflation, a stock market crash and other forms of financial panic that would inflict pain on its people — from billionaires to government officials to middle-class families.U.S. officials vow to unleash searing economic measures if Russia invades Ukraine, including sanctions on its largest banks and financial institutions, in ways that would inevitably affect daily life in Russia.But the strategy comes with political and economic risks. No nation has ever tried to enact broad sanctions against such large financial institutions and on an economy the size of Russia’s. And the “swift and severe” response that U.S. officials have promised could roil major economies, particularly those in Europe, and even threaten the stability of the global financial system, analysts say.Some analysts also warn of a potential escalatory spiral. Russia might retaliate against an economic gut punch by cutting off natural gas shipments to Europe or by mounting cyberattacks against American and European infrastructure.The pain caused by the sanctions could foment popular anger against Russia’s president, Vladimir V. Putin. But history shows that the country does not capitulate easily, and resilience is an important part of its national identity. U.S. officials are also sensitive to the notion that they could be viewed as punishing the Russian people — a perception that might fuel anti-Americanism and Mr. Putin’s narrative that his country is being persecuted by the West.From Cuba to North Korea to Iran, U.S. sanctions have a mixed record at best of forcing a change in behavior. And while the Biden administration and its European allies are trying to deter Mr. Putin with tough talk, some experts question whether they would follow through on the most drastic economic measures if Russian troops breached the border and moved toward Kyiv, Ukraine’s capital.President Biden has said he will not send American troops to defend Ukraine. Instead, U.S. officials are trying to devise a sanctions response that would land a damaging blow against Russia while limiting the economic shock waves around the world — including in the United States. Officials say that for now, the Biden administration does not plan to target Russia’s enormous oil and gas export industry; doing so could drive up gasoline prices for Americans already grappling with inflation and create a schism with European allies.But many experts on sanctions believe that the boldest sanctions against Russia’s financial industry, if enacted, could take a meaningful toll.“If the Biden administration follows through on its threat to sanction major Russian banks, that will reverberate across the entire Russian economy,” said Edward Fishman, who served as the top official for Russia and Europe in the State Department’s Office of Economic Sanctions Policy and Implementation during the Obama administration. “It will definitely affect everyday Russians.”Mr. Fishman added: “How are you going to change Putin’s calculus? By creating domestic disturbances. People will be unhappy: ‘Look what you did — all of a sudden my bank account is a fraction of what it was? Thanks, Putin.’”Understand Russia’s Relationship With the WestThe tension between the regions is growing and Russian President Vladimir Putin is increasingly willing to take geopolitical risks and assert his demands.Competing for Influence: For months, the threat of confrontation has been growing in a stretch of Europe from the Baltic Sea to the Black Sea. Threat of Invasion: As the Russian military builds its presence near Ukraine, Western nations are seeking to avert a worsening of the situation.Energy Politics: Europe is a huge customer of Russia’s fossil fuels. The rising tensions in Ukraine are driving fears of a midwinter cutoff.Migrant Crisis: As people gathered on the eastern border of the European Union, Russia’s uneasy alliance with Belarus triggered additional friction.Militarizing Society: With a “youth army” and initiatives promoting patriotism, the Russian government is pushing the idea that a fight might be coming.Sanctions imposed after Mr. Putin annexed Ukraine’s Crimean Peninsula in 2014 and gave military support to an insurgency in the country’s east created a modest drag on Russia’s economy. Those penalties and later ones took a surgical approach, heavily targeting Mr. Putin’s circle of elites as well as officials and institutions involved in aggression against Ukraine, in part to avoid making ordinary Russians suffer.U.S. officials say the impact of sanctions now would be categorically different.Washington is looking to take a sledgehammer to pillars of Russia’s financial system. The new sanctions that American officials are preparing would cut off foreign lending, sales of sovereign bonds, technologies for critical industries and the assets of elite citizens close to Mr. Putin.Previous sanctions heavily targeted Mr. Putin’s circle of elites as well as officials and institutions involved in aggression against Ukraine, in part to avoid making ordinary Russians suffer.Alexander Zemlianichenko/Associated PressBut the real damage to Russia’s $1.5 trillion economy would come from hitting the biggest state banks as well as the government’s Russian Direct Investment Fund, which has prominent Western executives on its advisory board. The Treasury Department would draw from its experience targeting Iranian banks under President Donald J. Trump, though Iran’s banks are much smaller and less integrated into the global economy than Russian banks.Once the department puts the Russian banks on what officials call its “game over” sanctions list, known as the S.D.N. list, foreign entities around the world would stop doing business with the banks, which would have a big effect on Russian companies.The United States would also enact sanctions to cut lending to Russia by foreign creditors by potentially $100 billion or more, according to Anders Aslund, an economist and an author of an Atlantic Council report on U.S. sanctions on Russia. Though Russia has taken steps since 2014 to rely less on foreign debt for expenses, such a loss could still devalue the ruble, shake the stock market and freeze bond trading, Mr. Aslund added.His report estimated that the 2014 sanctions reduced Russia’s annual economic growth by up to 3 percent, and new sanctions could bite much harder.For an average Russian, the harshest U.S. measures could mean higher prices for food and clothing, or, more dramatically, they could cause pensions and savings accounts to be severely devalued by a crash in the ruble or Russian markets.“It would be a disaster, a nightmare for the domestic financial market,” said Sergey Aleksashenko, a former first deputy chairman of the Central Bank of Russia and former chairman of Merrill Lynch Russia. He noted that the ruble had already fallen more than 10 percent from its October value against the dollar, amid increasing talk of Western sanctions.In a sign of the growing seriousness, officials from the National Security Council have been talking with executives from some of Wall Street’s largest banks, including Goldman Sachs, Citigroup, JPMorgan Chase and Bank of America, about the stability of the global financial system in the wake of potential sanctions.The European Central Bank has also warned bank lenders to Russia about risks if the United States imposes sanctions and has asked about the sizes of their loans.For now, though, American officials are not considering any immediate sanctions on the foundation of Russia’s economy: its oil and gas exports.​​European nations rely on natural gas from Russia, and several U.S. allies, notably Germany, prefer that Washington refrain from disrupting the Russian energy industry. Analysts say sanctions that limit Russia’s ability to export oil and gas would be by far the most powerful weapon against the Russian economy, and perhaps the most effective economic deterrent against an invasion of Ukraine, but they would also cause pain in Europe and the United States.“At some point, the West will have to sacrifice a little bit of its well-being if the goal is to deter Putin,” said Maria Snegovaya, a visiting scholar at George Washington University and an author of the Atlantic Council report.“U.S. inflation further constrains the administration’s actions,” she added. “Inflation is already unprecedented for the last 30 years. Any action against Russia that is dramatic will lead to changes in oil and gas prices.”Understand the Escalating Tensions Over UkraineCard 1 of 5A brewing conflict. More

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    U.S. and Others Pledge Export Controls Tied to Human Rights

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    A partnership with Australia, Denmark, Norway, Canada, France, the Netherlands and the United Kingdom aims to stem the flow of key technologies to authoritarian governments.WASHINGTON — The Biden administration announced a partnership on Friday with Australia, Denmark, Norway, Canada, France, the Netherlands and the United Kingdom to try to stem the flow of sensitive technologies to authoritarian governments.The partnership, named the Export Controls and Human Rights Initiative, calls for the countries to align their policies on exports of key technologies and develop a voluntary written code of conduct to apply human rights criteria to export licenses, according to a White House statement.The effort is aimed at combating the rise of “digital authoritarianism” in countries like China and Russia, where software and advanced surveillance technologies have been used to track dissidents and journalists, shape public opinion and censor information deemed dangerous by the government.The announcement was part of the last day of the Summit for Democracy, the White House’s virtual gathering of officials from over 100 countries aimed at bolstering democracies.By working to synchronize export controls across countries, American officials hope to cast a wider net to prevent authoritarian nations from accessing important technologies, as well as help companies with U.S. operations operate on a more even playing field.While a decade ago the internet was seen as a force for democracy and openness, authoritarian governments today have learned that big data, internet controls, artificial intelligence and social media “could make them even more powerful,” Samantha Power, the administrator for the U.S. Agency for International Development, said at the virtual summit on Friday.Ms. Power said the United States would undertake a suite of new measures over the next year to help set global norms around technology and human rights. Those steps include investing up to $20 million annually to drastically expand the digital democracy work of the Agency for International Development, working with like-minded countries to establish principles for open source technology products, and introducing an initiative with Canada and Denmark to lay out how governments should use surveillance technology in a manner consistent with human rights and the rule of law. The United States will also provide up to $3.75 million to fund new “democracy affirming” technologies, like privacy-preserving artificial intelligence, and establish a separate fund for anti-censorship technology, Ms. Power said. The government’s use of export controls, especially against China, greatly ramped up during the Trump administration, which imposed restrictions on ZTE, Huawei and other Chinese technology firms to prevent Beijing from gaining access to sensitive technologies like quantum computing, advanced semiconductor chips and artificial intelligence that could give its military an advantage or build up the Chinese surveillance state.But critics say those measures, by focusing only on American exports, fell short of their goals. While companies that manufacture products in the United States no longer ship certain goods to China, competitors in Japan, Europe and elsewhere have continued to make sales. That has encouraged some high-tech companies to devote more spending on research and development outside the United States, to maintain access to the lucrative Chinese market.American-developed technology has also been used by authoritarian governments for more nefarious purposes, like monitoring and censoring their citizens.In a joint statement issued Friday, Australia, Denmark, Norway and the United States said that “authoritarian governments increasingly are using surveillance tools and other related technologies in connection with serious human rights abuses, both within their countries and across international borders, including in acts of transnational repression to censor political opposition and track dissidents.”They added, “Such use risks defeating the benefits that advanced technologies may bring to the world’s nations and peoples.”The work at this week’s summit included exploring how best to strengthen domestic legal frameworks, share information on threats and risks, and share and develop best practices for controlling technology exports, a White House statement said.In the coming year, the countries are expected to consult with academics and industries on their efforts. Any decisions on controls of specific technologies will be voluntary and left up to individual countries to carry out.The Biden administration has continued a trend, begun in the Trump administration, of leveling export controls at companies engaged in human rights violations, including those that have supported China’s repression of Muslim minorities.This week, the Biden administration announced new restrictions on Cambodia to address human rights abuses, corruption and the growing influence of China’s military in the country. In November, the administration blacklisted the NSO Group, an Israeli technology firm, saying the company knowingly supplied spyware used to target the phones of dissidents, human rights activists and journalists.The administration has also accelerated discussions of export controls with Europe, through a partnership set up this year called the Trade and Technology Council. But given that there is no legal basis for imposing import bans across the European Union, decisions on those restrictions fall to its member states.The United States is already part of a multilateral arrangement on export controls called the Wassenaar Arrangement, which was established in 1996. But critics say the grouping, which has more than 40 members, including Russia, has moved too slowly to match the pace of technological development. More

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    U.S. Threat to Squeeze Russia’s Economy Is a Tactic With a Mixed Record

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    Sanctions, like aiming to cut oil exports, could also hurt European allies. “It’s a limited toolbox,” one expert said.LONDON — When Russian soldiers crossed into Ukraine and seized Crimea in 2014, the Obama administration responded with a slate of economic penalties that ultimately imposed sanctions on hundreds of Russian officials and businesses and restricted investments and trade in the nation’s crucial finance, oil and military sectors.Now, with Russian troops massing on Ukraine’s border, the White House national security adviser has declared that President Biden looked Russia’s president, Vladimir V. Putin, in the eye this week “and told him things we didn’t do in 2014 we are prepared to do now.”Whether harsher measures would persuade Russia to stay out of Ukraine, however, is far from clear. Historically, economic sanctions have a decidedly mixed track record, with more failures than successes. And actions that would take the biggest bite out of the Russian economy — like trying to severely curb oil exports — would also be hard on America’s allies in Europe.“We’ve seen that over and over again, that sanctions have a hard time really coercing changes in major policies” said Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics who has spent decades researching the topic. “It’s a limited toolbox.”President Biden is looking at the options available to ratchet up economic penalties against Russia.Stefani Reynolds for The New York TimesThe best chances of success are when one country has significant economic leverage over the other and the policy goal is limited, Mr. Schott said — yet neither of those conditions really applies in this case. Mr. Putin has made clear that he considers Russia’s actions in Ukraine a matter of national security. And outside of the oil industry, Russia’s international trade and investments are limited, especially in the United States.With direct military intervention essentially off the table, Biden administration officials have listed a series of options that include financially punishing Mr. Putin’s closest friends and supporters, blocking the conversion of rubles into dollars, and pressuring Germany to block a new gas pipeline between Russia and Northern Europe from opening.Work on that pipeline — called Nord Stream 2 — has been completed, but it is waiting for approval from Germany’s energy regulator before it can begin operating.Any request from Washington would coincide with a leadership change in Berlin. The new chancellor, Olaf Scholz, and his cabinet were sworn into office on Wednesday. He has not yet made any definitive statements on the pipeline. Gas reserves are unusually low in Europe now, however, and there are worries about shortages and soaring prices as winter approaches.Russia supplies more than a third of Europe’s gas through the existing Nord Stream pipeline and has already been accused of withholding supplies as a way of pressuring Germany to approve Nord Stream 2.Washington could impose much more sweeping sanctions on particular companies and banks in Russia that would more severely curtail investment and production in the energy sector. The risk of tough sanctions on a company like Gazprom, which supplies natural gas, is that Russia could retaliate by cutting its deliveries to Europe.“That would hurt Russia a lot but also hurt Europe,” Mr. Schott said.In terms of ratcheting up the pressure, James Nixey, the director of the Russia-Eurasia program at the Chatham House think tank, suggested that financially squeezing the oligarchs who help Mr. Putin maintain power could be one way of bringing more targeted pressure.“I would place a great premium on going after the inner and outer circle around Putin, which have connections back to the regime,” he said.At the moment, the swirl of ambiguity about possible United States actions is useful, he added: “It’s quite good if the Russians are kept guessing.”Russia, the United States and the European Union — which on Wednesday proposed expanding its power to use economic sanctions — are all playing something of a guessing game in order to pursue their policy goals. Russia is deploying troops on the border and at the same time is insisting on a guarantee that Ukraine won’t join NATO, while the West is warning there will be painful economic consequences if an invasion occurs.Ukrainian soldiers patrolling along the Kalmius River, which divides Ukrainian government-controlled territory from non-government-controlled areas, in November.Brendan Hoffman for The New York TimesOne of the most extreme measures would be to cut off Russia from the system of international payments known as SWIFT that moves money around the world, as was done to Iran.In 2019, the Russian prime minister at the time, Dmitri A. Medvedev, labeled such a threat as tantamount to “a declaration of war.”Maria Shagina argued in a report for the Carnegie Moscow Center that such a move would be devastating to Russia, at least in the short term. “The cutoff would terminate all international transactions, trigger currency volatility, and cause massive capital outflows,” she wrote this year.The SWIFT system, which is based in Belgium, handles international payments among thousands of banks in more than 200 countries.Since 2014, Moscow has taken steps to blunt the threat by developing its own system to process domestic credit card transactions, she noted. But it is another measure that would affect European countries more than the United States because they do so much more business with Russia.Several economic and political analysts have said restricting access to SWIFT would be a last resort.Arie W. Kruglanski, a psychology professor at the University of Maryland, said that in assessing the impact of sanctions, economists too often overlook the crucial psychological aspect.“Sanctions can work when leaders are concerned about economic issues more than anything else,” he said, but he doesn’t think the Russian leader falls into that category. To Mr. Kruglanski, strongman authoritarians like Mr. Putin are motivated by a sense of their own significance, and threats are more likely to stiffen opposition rather than encourage compromise.When it comes to Ukraine-related sanctions so far, the impact has been negligible, Mr. Nixey of Chatham House said.“A lot of these things the Russians have learned to live with, partly because implementation has been slow or poor and effects on the Russian economy are manageable,” he added.Success can be defined in various ways. Mr. Nixey said that the 2014 measures most likely deterred the Kremlin from further military interventions in Ukraine. A report for the Atlantic Council, a think tank that focuses on international relations, released this spring came to the same that conclusion.Sanctions certainly did not compel Russia to reverse its annexation of Crimea, Mr. Nixey said, but they may have persuaded Mr. Putin from taking more aggressive actions — at least until now. More

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    As Western Oil Giants Cut Production, State-Owned Companies Step Up

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    In the Middle East, Africa and Latin America, government-owned energy companies are increasing oil and natural gas production as U.S. and European companies pare supply because of climate concerns.HOUSTON — After years of pumping more oil and gas, Western energy giants like BP, Royal Dutch Shell, Exxon Mobil and Chevron are slowing down production as they switch to renewable energy or cut costs after being bruised by the pandemic.But that doesn’t mean the world will have less oil. That’s because state-owned oil companies in the Middle East, North Africa and Latin America are taking advantage of the cutbacks by investor-owned oil companies by cranking up their production.This massive shift could reverse a decade-long trend of rising domestic oil and gas production that turned the United States into a net exporter of oil, gasoline, natural gas and other petroleum products, and make America more dependent on the Organization of the Petroleum Exporting Countries, authoritarian leaders and politically unstable countries.The push by governments to increase oil and gas production means it could take decades for global fossil fuel supplies to decline unless there is a sharp drop in demand for such fuels. President Biden has effectively accepted the idea that the United States will rely more on foreign oil, at least for the next few years. His administration has been calling on OPEC and its allies to boost production to help bring down rising oil and gasoline prices, even as it seeks to limit the growth of oil and gas production on federal lands and waters.The administration’s approach is a function of two conflicting priorities: Mr. Biden wants to get the world to move away from fossil fuels while protecting Americans from a spike in energy prices. In the short run, it is hard to achieve both goals because most people cannot easily replace internal-combustion engine cars, gas furnaces and other fossil fuel-based products with versions that run on electricity generated from wind turbines, solar panels and other renewable sources of energy.Western oil companies are also under pressure from investors and environmental activists who are demanding a rapid transition to clean energy. Some U.S. producers have said they are reluctant to invest more because they fear oil prices will fall again or because banks and investors are less willing to finance their operations. As a result, some are selling off parts of their fossil fuel empires or are simply spending less on new oil and gas fields.That has created a big opportunity for state-owned oil companies that are not under as much pressure to reduce emissions, though some are also investing in renewable energy. In fact, their political masters often want these oil companies to increase production to help pay down debt, finance government programs and create jobs.Saudi Aramco, the world’s leading oil producer, has announced that it plans to increase oil production capacity by at least a million barrels a day, to 13 million, by the 2030s. Aramco increased its exploration and production investments by $8 billion this year, to $35 billion.“We are capitalizing on the opportunity,” Aramco’s chief executive, Amin H. Nasser, recently told financial analysts. “Of course we are trying to benefit from the lack of investments by major players in the market.”Aramco not only has vast reserves but it can also produce oil much more cheaply than Western companies because its crude is relatively easy to pump out of the ground. So even if demand declines because of a rapid shift to electric cars and trucks, Aramco will most likely be able to pump oil for years or decades longer than many Western energy companies.“The state companies are going their own way,” said René Ortiz, a former OPEC secretary general and a former energy minister in Ecuador. “They don’t care about the political pressure worldwide to control emissions.”State-owned oil companies in Kuwait, the United Arab Emirates, Iraq, Libya, Argentina, Colombia and Brazil are also planning to increase production. Should oil and natural gas prices stay high or rise further, energy experts say, more oil-producing nations will be tempted to crank up supply.The global oil market share of the 23 nations that belong to OPEC Plus, a group dominated by state oil companies in OPEC and allied countries like Russia and Mexico, will grow to 75 percent from 55 percent in 2040, according to Michael C. Lynch, president of Strategic Energy and Economic Research in Amherst, Mass., who is an occasional adviser to OPEC.If that forecast comes to pass, the United States and Europe could become more vulnerable to the political turmoil in those countries and to the whims of their rulers. Some European leaders and analysts have long argued that President Vladimir V. Putin of Russia uses his country’s vast natural gas reserves as a cudgel — a complaint that has been voiced again recently as European gas prices have surged to record highs.A pump jack in Stanton, Texas. American companies have been cautiously holding back exploration and production.Brandon Thibodeaux for The New York TimesOther oil and gas producers like Iraq, Libya and Nigeria are unstable, and their production can rise or fall rapidly depending on who is in power and who is trying to seize power.“By adopting a strategy of producing less oil, Western oil companies will be turning control of supply over to national oil companies in countries that could be less reliable trading partners and have weaker environmental regulations,” Mr. Lynch said.An overreliance on foreign oil can be problematic because it can limit the options American policymakers have when energy prices spike, forcing presidents to effectively beg OPEC to produce more oil. And it gives oil-producing countries greater leverage over the United States.“Today when U.S. shale companies are not going to respond to higher prices with investment for financial reasons, we are depending on OPEC, whether it is willing to release spare production or not,” said David Goldwyn, a senior energy official in the State Department in the Obama administration. He compared the current moment to one in 2000 when the energy secretary, Bill Richardson, “went around the world asking OPEC countries to release spare capacity to relieve price pressure.”This time, state-owned energy companies are not merely looking to produce more oil in their home countries. Many are expanding overseas.In recent months, Qatar Energy invested in several African offshore fields while the Romanian national gas company bought an offshore production block from Exxon Mobil. As Western companies divest polluting reserves such as Canadian oil sands, energy experts say state companies can be expected to step in.“There is a lot of low-hanging fruit state companies can pick up,” said Raoul LeBlanc, an oil analyst at IHS Markit, a consulting and research firm. “It is a huge opportunity for them to become international players.”Kuwait announced last month that it planned to invest more than $6 billion in exploration over the next five years to increase production to four million barrels a day, from 2.4 million now.This month, the United Arab Emirates, a major OPEC member that produces four million barrels of oil a day, became the first Persian Gulf state to pledge to a net zero carbon emissions target by 2050. But just last year ADNOC, the U.A.E.’s national oil company, announced it was investing $122 billion in new oil and gas projects.Iraq, OPEC’s second-largest producer after Saudi Arabia, has invested heavily in recent years to boost oil output, aiming to raise production to eight million barrels a day by 2027, from five million now. The country is suffering from political turmoil, power shortages and inadequate ports, but the government has made several major deals with foreign oil companies to help the state-owned energy company develop new fields and improve production from old ones.Even in Libya, where warring factions have hamstrung the oil industry for years, production is rising. In recent months, it has been churning out 1.3 million barrels a day, a nine-year high. The government aims to increase that total to 2.5 million within six years.National oil companies in Brazil, Colombia and Argentina are also working to produce more oil and gas to raise revenue for their governments before demand for oil falls as richer countries cut fossil fuel use.After years of frustrating disappointments, production in the Vaca Muerta, or Dead Cow, oil and gas field in Argentina has jumped this year. The field had never supplied more than 120,000 barrels of oil in a day but is now expected to end the year at 200,000 a day, according to Rystad Energy, a research and consulting firm. The government, which is considered a climate leader in Latin America, has proposed legislation that would encourage even more production.“Argentina is concerned about climate change, but they don’t see it primarily as their responsibility,” said Lisa Viscidi, an energy expert at the Inter-American Dialogue, a Washington research organization. Describing the Argentine view, she added, “The rest of the world globally needs to reduce oil production, but that doesn’t mean that we in particular need to change our behavior.” More