According to media reports Russian energy giant Gazprom has hiked the price of gas supplies to Ukraine, sending a warning of the power Russia holds over European energy markets.
The price rise comes as escalating unrest in Ukraine threatens to boil over into war a situation that has already stoked fears of disruption to energy supplies from Russia to other parts of the world.
Meanwhile, some analysts argued that Russia had overplayed its hand, and under-estimated the potential for countries like Ukraine to exploit their own shale gas reserves.
Even so, the timing of the Gazprom decision solidified fears that the unfolding crisis in Ukraine could impact energy markets worldwide – especially in the European Union, which gets more than a quarter of its gas from Russia.
Analysts fear that Russia one of the world’s largest oil and gas producers – could be blocked from exporting energy supplies if it declares war on its neighbour, or that the conflict in Ukraine could disrupt supplies of gas that are transported through the region.
Personally I think direct economic impact to Ukraine is likely to be “fairly limited”, but that recent events had “pushed investors into ‘risk-off’ mode and are likely to be a source of continued volatility, especially if Ukraine appears to be heading toward a messy sovereign default”.