German chancellor Scholz pushes back against Russian energy import ban, as oil and gas climb – as it happened

• 6.33pm GMT 18:33 Closing summary
• 6.09pm GMT 18:09 Larry Elliott: West feeling impact of Russia sanctions too as oil and gas prices soar
• 5.55pm GMT 17:55 Germany's DAX index in bear market
• 5.18pm GMT 17:18 FTSE 100 closes lower
• 4.08pm GMT 16:08 Boris Johnson signals opposition to US idea for Russian oil import ban
• 2.32pm GMT 14:32 Germany's Scholz pushes back against ban on Russian energy imports
• 12.54pm GMT 12:54 Market update: off the lows

14:32

Updated at 3.10pm GMT

With European stock markets closed, here’s a recap of the main events today.

Germany’s chancellor, Olaf Scholz, has pushed back against calls to ban Russian oil and gas imports as part of western sanctions against Moscow over its invasion of Ukraine.

Scholz cautioned that such a move could put Europe’s energy security at risk, and that energy imports from Russia were currently essential to citizens’ daily lives.

Scholz statement came after the US secretary of state, Antony Blinken, said on Sunday that the US was talking to its European allies about banning Russian oil imports.

Blinken’s comments triggered a dramatic surge in oil prices overnight, with Brent crude up 18% at one stage to hit $139 per barrel, the highest in 14 years.

It has since dipped back but is still around $125 per barrel, up from below $80 at the start of this year.

The price of wholesale gas also leapt alarmingly today, with the UK contract for delivery next month hittinga record of 800p per therm, compared to typical prices below 50p/therm a year ago.

Gas prices closed about 10% higher tonight around 500p, a level that would intensify the cost-of-living crisis gripping households and businesses.

European stock markets racked up fresh losses, as the Ukraine war continued to hammer share prices. Germany’s DAX shed another 2%, ending in a bear market – over 20% below its record high in January.

In London, the FTSE 100 fell another 0.4%, with oil producers and miners rallying, but banks, travel companies, retailers and consumer goods makers all under renewed pressure.

Companies continued to cut ties with Russia. All four of the UK’s big accountancy firms have now cut off businesses in Russia and Belarus, with EY and Deloitte joining KPMG and PwC in legally separating their operations.

The Conservative peer Greg Barker has resigned as chairman of EN+, the mining company part-owned by the sanctioned Russian oligarch Oleg Deripaska.

Three more Russian billionaires have resigned from the board of the $22bn (£17bn) investment firm LetterOne after the EU imposed sanctions on its two biggest shareholders.

Here are more of today’s stories:

We’ll be back tomorrow. Goodnight, GW.

Jennifer Rankin

The European Union is in the grip of a “growing gas crisis” aggravated by its dependency on Russia, Brussels will warn, as it makes a further push for energy savings and a switch to renewable power.

According to a draft paper on EU energy prices, which is due to be published on Tuesday, and which has been seen by the Guardian:

Gas and electricity prices will remain high and volatile until at least 2023. Compared to the outlook of last autumn, the situation has deteriorated.

Along with the rest of the world, the EU has been grappling with soaring energy prices for months, but Russia’s invasion of Ukraine has provoked soul searching about Europe’s gas dependency.

The union imports 40% of its gas from Russia, a figure unchanged in more than 15 years despite repeated gas crises triggered by Moscow cutting off supplies.

The policy paper also confirms that EU competition authorities are investigating the Russian state energy company Gazprom for its “unusual business behaviour”. The Russian company’s EU storage facilities are only 16% full, compared with 44% for non-Gazprom storage, raising suspicions that the Kremlin is using gas as a geopolitical tool.

Our main Ukraine-Russia war liveblog has more details.

Larry Elliott

One of the ironies of the war in Ukraine is that the Kremlin’s finances benefit every time the crisis deepens, our economics editor Larry Elliott writes.

After Saudi Arabia, Russia is the second biggest exporter of crude oil, and it is out on its own as an exporter of natural gas.

Countries producing more oil and gas than they consume enjoy windfall gains when prices rise – and Russia falls into that category.

Conversely, countries not self-sufficient in energy suffer when prices are high because costs for business rise and consumer spending power is squeezed. There is a lively debate about whether the US is self-sufficient in energy, but it is certainly a lot less dependent on imports than the European Union, which gets 40% of its natural gas from Russia.

Europe is a lot more vulnerable to a loss of Russian energy supplies than the US, and that helps explain why the German chancellor, Olaf Scholz, is more cautious than Washington over extending the west’s sanctions regime to oil and gas – at least for now.

Here’s Larry’s full analysis:

Rupert Neate

Three more Russian billionaires have resigned from the board of the $22bn (£17bn) investment firm LetterOne after the EU imposed sanctions on its two biggest shareholders.

The company, which owns the health retail chain Holland & Barrett in the UK and a swathe of energy assets across Europe, said on Monday that German Khan, Alexei Kuzmichev and Andrei Kosogov had “resigned from all positions at LetterOne, including the board”.

It said:

“None of these three individuals has been sanctioned, but they believe that this is the right thing to do in the long-term interests of LetterOne, its employees and the many jobs it supports in its portfolio companies.”

Last week the UK-based Russian billionaire oligarchs Mikhail Fridman, LetterOne’s founder, and Petr Aven, who between them own just under 50% of LetterOne, had their shares in the company “frozen” after they were hit with EU sanctions following Russia’s invasion of Ukraine. The pair then stepped down from the London-based investment group.

Mervyn Davies, the company’s chair and a former Labour trade minister, said he was determined to stay on at L1, despite repeated calls for him to step down.

“The new board and I will focus on protecting the enormous economic and social contribution LetterOne makes,” Lord Davies said.

“I am also determined to ensure that the 120,000 jobs throughout the UK, US and Europe are protected. We know that everyone involved in L1, including our founders, would want us to take these steps given their love and passion for and heritage in Ukraine.”

Tom Tugendhat, a Conservative MP and the chair of the foreign affairs committee, told the Mail on Sunday that Davies should step down. “Some moments demand a choice, this is one,” he said.

Davies said LetterOne would make a $150m donation to “support the urgent work under way to help those affected by the war in Ukraine”.

More here:

Germany’s benchmark share index has fallen into a bear market, as the Ukraine war threatens to push Europe’s largest economy into recession.

The DAX index of 40 leading German companies has closed 2% lower tonight, and more than 20% off its record closing high set in January.

Germany’s reliance on Russian energy imports, and the pressure on banks and car manufacturers, means the DAX has been particularly hit by the escalating conflict in Ukraine.

Today’s losses have left the Dax at its lowest level since November 2020, meaning it has lost all its gains since the succesful Covid-19 vaccine trials from Pfizer, Moderna and AstraZeneca spurred the global economic recovery last year.

The Euro Stoxx 50 of ended 1.2% lower, also closing in a bear market.

MIchael Hewson of CMC Markets says:

In what has been a turbulent Monday session, European markets plunged sharply at the open on reports that the US was discussing the prospect of a total ban on Russian oil, which briefly sent Brent crude oil prices spiking up to $140 a barrel in Asia.

This spike higher proved to be rather short-lived, but it also highlighted how fickle market sentiment is, and is likely to remain, and while prices have since retreated from those intraday highs, they are still up on the day.

While the US could probably get away with banning oil imports, it is clear that the case for doing so in Europe is a much harder one to make, with Germany pushing back by saying it would not do so.

The UK’s FTSE 250 index of medium-sized firm also racked up fresh losses today.

It dropped 1.1% to a new 16-month low.

Oxford Instruments, which makes x-ray tubes, optical imaging and microscopy tools, tumbled almost 23% after the rival precision equipment manufacturer Spectris abandoned its £1.8bn takeover offer today.

Spectris blamed the market volatility sparked by Russia’s invasion of Ukraine, saying this morning:

“With the invasion of Ukraine, the world has changed since our proposed offer was made regarding a combination of our businesses, bringing a high degree of uncertainty to the economic outlook around the world.

“While we believe this combination is a great opportunity for both companies, the timing is no longer right and we have brought our discussions to a close.”

Travel firms were also among the fallers, with easyJet down 7.5% and the package holiday group TUI 6.8% lower, while the real estate investment trust Hammerson fell almost 10%.

After another day of market turmoil, the UK’s FTSE 100 index has finished the session at its lowest close in more than five months.

The blue-chip index has closed 28 points lower at 6,959 points, the lowest close since September 2021, adding to last week’s losses (the index’s worst week since March 2020).

The Ukraine crisis continued to hit banks, travel companies, retailers and consumer goods makers, on concerns that inflation will surge and growth will weaken, pushing up unemployment.

The engineering group Melrose fell 6.7%, the insurer Prudential lost 6.1%, and the airline group IAG shed 5.9%, while NatWest and Lloyds dropped 4%.

But the surge in commodity prices pushed up Shell (+8%) and BP (+3.8%), and miners such as Glencore (+3%).

The Russian steel and mining business Evraz rose 28% but has still lost three-quarters of its value this year as the invasion of Ukraine led to a collapse in its share price.

Jasper Jolly

The UK tax authority has withdrawn petitions to close down four Liberty Steel companies, giving breathing space to the GFG Alliance metals empire presided over by Sanjeev Gupta.

Gupta’s collection of metals companies, including steel, aluminium and energy plants, has been struggling for finance for a year since the collapse of its main lender, Greensill Capital. The companies are said to employ as many as 35,000 people around the world.

The UK winding-up petitions, revealed last month, threatened the jobs of 3,000 workers across five plants, mostly in the north of England, including relatively large mills making speciality steel in Rotherham and Stocksbridge in South Yorkshire.

That threat appears to have receded with the HMRC deal, although GFG also announced that workers at Liberty Pressing Solutions in Coventry had been put into consultations about a possible closure of the plant.

The factory had 580 employees, according to its latest accounts, for 2019, but it is thought there are now only about 200 workers who could be made redundant.

Gas prices have eased back from their morning surge but are still at painful, unprecedented levels.

Wholesale natural gas for next-day delivery in the UK is now up 10% today at 515p per therm.

That’s still a desperately high price, and more than 10 times higher than a year ago, having hit 670p/therm in early trading.

The price of gas for delivery in April is now up 13% at 520p per therm, having hit an astonishing 800p earlier.

The sanctions that have been imposed on Russia following the invasion of Ukraine could push up inflation and hit the UK economy, MPs heard today.

Neil Shearing, the chief economist at Capital Economics, told the Treasury select committee that the sanctions could add an extra percentage point to UK inflation.

Gross domestic product (GDP) might take a hit of between 0.25% to 0.5% because of the sanctions.

This does not mean the economy will shrink, just that it will grow less rapidly, he told the committee.

This is based on current sanctions, which include those on Russian banks and oligarchs. However, any future potential sanctions on energy are not included.

Should the west sanction Russian oil and gas then these hits might be doubled, he said.

“By far and away the most significant hit to the UK economy at the moment is going to come through the effect on energy prices and the cost of our imports, not because we import a lot from Russia, but because global prices have gone up.”

MPs also heard that the UK was “in uncharted territory” over its sanctions against Russia, as Chloe Chaplain of the I newspaper reports:

The US stock market has started the week with fresh falls.

The Dow Jones industrial average of 30 large US companies has dropped by over 1%, currently down 412 points at 33,202.

The broader S&P 500 index is down 1.3%, with travel stocks, banks, consumer goods makers and technology stocks all weaker, while energy stocks are rallying.

The UK prime minister, Boris Johnson, and the Dutch PM, Mark Rutte, have signalled their opposition to a ban on Russian energy imports, which the US had been pushing for.

At a Downing Street press briefing in London, Johnson said it was not possible to simply close down imports of oil and gas from Russia overnight – which rather chimes with Olaf Scholz’s statement.

Johnson argued that countries should all move in the same direction and accelerate the move away from dependency on Russian energy supplies.

He said:

“I think there are different dependencies in different countries, and we have to be mindful of that.

“And you can’t simply close down use of oil and gas overnight, even from Russia - that’s obviously not something every country around the world can do.

“We can go fast in the UK, other countries can go fast, but there are different dependencies.

“What we need to do is make sure we are all moving in the same direction, and we all share the same assumptions and we accelerate that move, and I think that is what you are going to see - you’ve heard that from leaders around the world.

“But clearly there is going to be a transitional period, we are going to have to look for supply, we are going to have to look for substitute supplies from elsewhere and we are going to have to do it together across the entire coalition of countries that is now condemning Putin’s actions.”

Rutte said there would be a “painful reality” as countries looked to move away from Russian energy dependency.

He said sanctions must not create “unmanageable risks” to European energy supplies, but that over time Europe must reduce its reliance on Russian energy.

Andrew Sparrow’s Politics Live blog has full details:

Fears of European bans on Russian oil – and potential retaliation or follow-up moves in gas or other commodities – have subsided through today’s session, says Craig Erlam of OANDA.

Having jumped 18% last night to $139 a barrel, Brent crude has now dropped back to around $123 – still up 4% today, meaning inflationary pressures are still intense.

Gas prices have also eased a little, but the wholesale price of next-day delivery in the UK is still up 20% today at 565p per therm.

Erlam explains:

On the one hand, without German support, an EU ban on Russian oil imports looks highly unlikely and the pivot away will take years. But then there’s a lot that’s happened in the last couple of weeks that looked highly unlikely a month ago and the situation continues to evolve rapidly.

The risks remain firmly tilted to the upside as far as oil prices are concerned. Downside risks primarily focus around Ukraine and Russia finding common ground and based on the current demands, that does not look likely any time soon.

Bloomberg says Olaf Scholz has poured cold water on efforts within the EU to impose sanctions on Russia’s oil and gas sector (see last post).

German Chancellor Olaf Scholz said he opposes cutting off energy supplies from Russia, calling imports of oil and gas of “essential importance” to the European economy.

While the European Union faces an urgent task of finding alternatives to Russian energy supplies, “this won’t happen overnight,” Scholz said Monday in a statement. “It’s therefore a conscious decision on our part to continue the activities of business enterprises in the area of energy supply with Russia.”

Heating, transport and electricity cannot be secured in the short term without these imports, he added.

More here: Germany Signals Opposition to Cutting ‘Essential’ Russian Energy

The German chancellor, Olaf Scholz, has pushed back against calls to ban Russian oil and gas imports, as part of western sanctions against Moscow over its invasion of Ukraine.

In a statement, Scholz cautioned that such a move could put Europe’s energy security at risk, and that energy imports from Russia were currently essential to citizens’ daily lives.

Scholz said:

“Europe has deliberately exempted energy supplies from Russia from sanctions.

“Supplying Europe with energy for heat generation, mobility, electricity supply and industry cannot be secured in any other way at the moment. It is therefore of essential importance for the provision of public services and the daily lives of our citizens.”

Scholz’s comments come a day after the US secretary of state, Antony Blinken, said the US was in talks with European allies about banning imports of Russian oil, to intensify the pressure on Moscow to halt its invasion of Ukraine.

Blinken’s comments had sent Brent crude oil soaring to 14-year highs of $139 per barrel.

But Brent has now dropped back to around $120, up 2% today.

In his statement, Scholz defended a decision by the European Union to spare Russia’s energy sector from sanctions over its invasion of Ukraine. He argued that Russian energy was needed until alternatives sources were found.

“The federal government has been for months working urgently with its partners in the European Union and beyond to develop alternatives to Russian energy.

“This cannot be done overnight.”

Seperately, the finance minister, Christian Lindner, has said Germany is not currently planning to stop importing Russian oil, gas and coal but is keeping the option open.

“This option is of course on the table,” Lindner told reporters (via Reuters).

“At this point in time, however, it seems advisable for the sustainability of the sanctions against Vladimir Putin not to take this step ourselves.”

Lindner added:

“I do not rule out anything for later this year.”

Rob Davies

The National Grid Electricity System Operator (ESO) is announcing a “trailblazing” greener way of generating inertia in the electricity grid, to make the UK less reliant on gas supplies, including those from Russia, my colleague Rob Davies writes.

If all goes to plan, it could also reduce carbon emissions, rein in household bills and recoup the £336m investment funding it.

In the electricity system, inertia is crucial in maintaining a stable electrical frequency on the grid, keeping the lights on. In August 2019, more than 1 million people across the UK were plunged into darkness during one of the worst power blackouts in more than a decade, after the frequency of the grid fell from its usual 50Hz to 48.88Hz.

That unprecedented loss of power generation was caused by a lightning strike, but outages can happen for other reasons too, causing a sudden shortfall that knocks the system’s frequency off kilter.

As things stand, the grid system usually balances itself automatically thanks to the inertia held in massive spinning turbines at coal and gas power stations – much like a spinning top, but 19.5 metres (64ft) long and made of 300 tonnes of steel and aluminium.

They respond instantaneously to a power outage happening elsewhere, spinning ever so slightly slower to offset the disruption and keep the system stable.

However, these giant turbines are not a feature of wind or solar power generation, meaning that as the UK aims to decarbonise the electricity grid by 2025 as part of efforts to hit net zero, inertia needs to come from somewhere else.

The solution, according to National Grid ESO, whose job it is keeps the electricity network in check, is a series of green turbines created to mimic the effect of their cousins at carbon-emitting fossil fuel plants.

With only a small amount of energy fed into them, they can spin at the required rate of 3,000RPM, the speed that ensures synchronicity with the 50hz Grid system.

The result, in theory, is a solution to the problem of creating inertia in an increasingly wind- and solar-powered electricity system, allowing for a faster push away from fossil fuels that emit carbon and line the pockets of countries such as Russia.

Here’s the full story: