Return to Russian energy would be 'strategic blunder,' EU says — but Moscow smells blood

The EU must not abandon plans to ditch Russian oil and gas, European Commission President Ursula von der Leyen has said, as the war in Iran causes a painful supply crunch.

But Moscow is threatening to shut the door early, as the continent continues to wean itself off its supplies.

The EU has scaled back imports of Russian energy since its invasion of Ukraine in 2022, and is planning an outright ban on all Russian energy imports. But the U.S.-Israeli war on Iran has sent international markets into a tailspin, limiting oil and gas supplies and sending prices soaring.

Oil prices over the last five days.

Europe is particularly vulnerable to an energy shock, and more Moscow-friendly European states like Hungary have called for a lifting of EU sanctions on Russian energy imports to ease the supply crisis.

Von der Leyen said on Wednesday that it would be a "strategic blunder" for the EU to abandon its strategy.

"In the current crisis, some argue that we should abandon our long-term strategy and even go back to Russian fossil fuels," von der Leyen said in a speech in the European Parliament.

She said the EU was preparing other options to lower energy prices for its 27 constituent states, including state aid measures, power purchasing agreements and subsidies or caps on energy prices.

Von der Leyen was speaking after Russian President Vladimir Putin has already said his government "may decide not to wait for Europe to completely reject its oil and gas."

Sensing the opportunity to tighten the screws on Europe, Putin said on Monday: "The government has already set the task of evaluating the possibility and feasibility of stopping our fuel supplies to the European market, without waiting for the door to be demonstratively slammed in front of us."

"The task is to do it now and to redirect these volumes from the European markets to more promising areas, and, most importantly, to gain a foothold there," he added, in comments reported by state news agency TASS.

The EU has looked to drastically reduce its reliance on Russian energy, with imports dropping to approximately 13% for both liquefied natural gas (LNG) and pipeline gas, and below 3% for oil — down from 45% and 27%, respectively, in 2021, the European Council notes.

But all of Russia's LNG exports from its Arctic Yamal facility went to EU nations in February.

In January, the European Council adopted a regulation to prohibit LNG and pipeline gas imports from Russia from March 18, with transition periods for existing contracts. By the end of 2027, all Russian gas imports will be prohibited, it said.

On Tuesday, Russian Deputy Prime Minister Alexander Novak said that the country's companies will redirect part of the LNG currently being supplied to European countries to other markets, without waiting for the EU's import ban to take effect, per Interfax.

His comments came after Putin asked the government and companies to consider halting gas supplies to the European market without waiting for an import ban.

"Some other markets are opening up, and it might be more advantageous for us to halt shipments to the European market right now and go to the markets that are opening up and gain a foothold there," the Russian president said on March 4.

He added: "If they close themselves to us in a month or two, we'd better halt [supplies] right now and go to countries that are reliable partners and gain a foothold there."

The Kremlin did not immediately respond to a request for comment from CNBC.

With the ban on Russian gas imports just around the corner, the Iran war and concurrent limits on global exports of oil and gas from the Middle East is terrible timing for the EU, which has already struggled to reach a consensus on banning cheap Russian energy.

Russia-friendly states Hungary and Slovakia have shunned efforts to outlaw Russian supplies, and have continued to import Russian oil via the Druzhba pipeline, and gas via associated transit lines, that run through Ukraine. The Druzhba pipeline is out of action having been damaged during the war, however.

In late February, Hungary accused Ukraine of deliberately keeping the pipeline closed and of effectively imposing an oil "blockade" on the country. Ukraine said the pipeline had been shut because of Russian attacks.