Analyst: Russia could only do more harm to Lithuania through cuts in gas supplies

“Looking at the structure of Lithuania’s exports, it’s possible to say that Russia has used one of its best cards. No other sectors in Lithuania export such a big share of their output to Russia… It would be problematic if Russia chose a strange way – the way of restricting the supply of energy resources to the European Union. In theory, such a scenario is possible. However, in this case Russia would also do harm to itself since the production and exports of oil and gas account for 50 percent of its budget revenue,” Nerijus Mačiulis said at a news conference on Tuesday.

Energy resources remained Russia’s weak point in particular due to the continuing decline in their prices in the global market, he said.

“The prices for energy resources, which are the largest source of income for Russia, are going down and that’s the heel of Achilles for the Russian economy. We expect Russia’s gross domestic product to contract both this year and next… Of course, it’s very disadvantageous for Russia as its income won’t grow and there’ll be no possibilities to stimulate the economy. In this context, Russia’s decision to move into a rather open economic conflict with the Western countries looks very strange,” the economist said.

The prices of oil were now expected to hover around 100 US dollars per barrel in the near year, Mačulis said, adding that the estimates showed that Russia needed the price of some 110 US dollars per barrel for its economy to recover. However, the prices would not reach such levels in the near future since the demand for oil was decreasing and the supply, on the contrary, was growing.

Moreover, if the situation in the Middle East changed, oil prices could come close to the level that would be dangerous for Russia, i.e., of less than 90 US dollars per barrel.

According to Mačiulis, Russia was well aware of the fact that the shale revolution in the US and Washington’s plans to liberalize the sale of gas to Europe would undermine Russia’s influence.

“Moscow is perfectly aware of the fact that now it’s the last decade when it can still use gas as an economic leverage.”