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The EU’s executive on Wednesday proposed a new round of sanctions on Moscow over its latest “escalation” in Ukraine, including an oil price cap and ban on Russian exports worth seven billion euros ($7 billion). 

It also plans to expand its travel blacklist and asset freezes to include high-ranking Russian defence officials and organisers of widely derided annexation votes in occupied Ukrainian territories.

“Last week, Russia has escalated the invasion of Ukraine to a new level,” European Commission President Ursula von der Leyen said.

She listed the “sham” referendums staged by Russia in the occupied regions of Ukraine, Moscow’s military mobilisation and President Vladimir Putin’s “threat to use nuclear weapons”. 

“We’re determined to make the Kremlin pay for this further escalation,” von der Leyen said. 

As part of the new round of sanctions — which has to be signed off by the bloc’s 27 nations — the commission is laying out a “legal basis” for a price cap on Russian oil, in line with an agreement by the G7.

It will also look to ban Russian exports worth $7 billion and tighten restrictions on goods flowing from the EU that could help Russia’s war machine. 

“The aim is here to deprive the Kremlin’s military complex of key technologies,” von der Leyen said.

“For example, this includes additional aviation items, or electronic components and specific chemical substances.”

The proposal includes a prohibition on Europeans sitting on the board of Russian state-owned companies. 

EU foreign policy chief Josep Borrell said the blacklisted individuals would also include those helping Moscow to circumvent sanctions.

The bloc has already imposed seven waves of unprecedented sanctions on Moscow since it invaded its pro-Western neighbour at the end of February.  

The EU has already agreed a ban in May on most oil flowing from Russia to the bloc, to take full effect in December.

The push for an oil price cap is aimed at limiting how much third countries, such as China and India, pay for Russian crude. 

To get there, it would include restrictions on European firms shipping and ensuring Russian oil cargoes heading to the rest of the globe. 

The Baltic states, Ireland and Poland had pushed for stronger measures to be taken in this latest round, among them restricting cooperation with Russia’s commercial nuclear sector. 

That measure, though, was rebuffed by member states worried about further hitting energy supplies as Europe faces a crunch in the face of Russian cuts this winter. 

The EU said Wednesday that leaks from two Russia-Germany undersea gas pipelines appeared to be “a deliberate act”, as Moscow said it would call for a UN Security Council meeting over the incident.

The three outflows from the Nord Stream 1 and 2 pipelines have sent natural gas prices soaring, exacerbating an energy crunch in Europe as it stands on the threshold to winter and fanning geopolitical tensions.

Methane gas from the leaks are bubbling to the surface of the Baltic Sea close to Denmark and Sweden in discharges expected to last for a week, until depletion of the gas in the pipelines.

Europe has alleged the leaks are from sabotage, and fossil fuel-rich Norway boosted security at its installations in response.

They “are not a coincidence,” EU foreign policy chief Josep Borrell said in a statement. “All available information indicates those leaks are the result of a deliberate act.”

He warned: “Any deliberate disruption of European energy infrastructure is utterly unacceptable and will be met with a robust and united response.”

Suspicion has focused on Russia, which has cut gas supplies to Europe in retaliation for severe Western sanctions over the war in Ukraine.

But the Kremlin hit back, saying it was “stupid and absurd” to accuse Russia of causing the leaks and calling instead for President Joe Biden to answer whether the US was behind them.

The Kremlin said it would ask for the United Nations Security Council to convene “in connection with provocations” over the pipeline.

EU chiefs Ursula von der Leyen and Charles Michel have both also blamed the Nord Stream leaks on sabotage, as have leaders of several European countries.

Michel tweeted that they “appear to be an attempt to further destabilise energy supply to EU”.

He added: “Those responsible will be held fully accountable and made to pay.”

The EU is currently mulling further sanctions on Russia for annexation votes imposed on four regions in Ukraine its forces occupy.

Neither of the Nord Stream pipelines are currently operational, but they were full with gas when they were hit with what Swedish seismologists said were “massive releases of energy”.

One of the seismologists told AFP “there isn’t much else than a blast that could cause it”.

Danish Defence Minister Morten Bodskov told reporters in Brussels that “it can easily take one or two weeks for the area to calm down enough” for an inspection to verify the cause.

Two Danish military vessels have been sent to the area.

Non-EU member Norway — which has now overtaken Russia as the biggest supplier of gas to Europe — said it will beef up security around its oil and gas facilities.

“The government has decided to put measures in place to increase security at infrastructure sites, land terminals and platforms on the Norwegian continental shelf,” Norwegian Energy Minister Terje Aasland said.

The Norwegian Petroleum Safety Authority earlier this week called for “increased vigilance from all operators and shipping companies on the continental shelf”.

Built in parallel to the Nord Stream 1 pipeline, Nord Stream 2 was intended to double the capacity for Russian gas imports to Germany.

But Berlin blocked newly completed Nord Stream 2 in the days before the war.

Germany, which has been highly dependent on imports of fossil fuels from Russia to meet its energy needs, has since come under acute stress as Moscow’s supplies dwindle.

Sweden and Poland agree sabotage is the most likely cause of the Nord Stream leaks, with Warsaw suggesting Russia was probably the culprit, to escalate the war in Ukraine.

Kwasi Kwarteng has been finance minister for less than a month but is already in the firing line as Britain’s economy teeters on the brink following his first policy announcement.

The 47-year-old free-marketeer last week announced sweeping tax cuts, spooking currency and bond markets concerned about his mammoth spending commitments, and earning a rebuke from the IMF.

Kwarteng is a close ally of Liz Truss, who this month won the race to become prime minister following the resignation of scandal-hit Boris Johnson.

She was voted in by Conservative members on a promise to cut taxes, plans that her rival Rishi Sunak, who was finance minister under Johnson, said were a recipe for disaster in the face of spiralling inflation.

Kwarteng’s devout belief in liberal economics made him the obvious choice to carry out her plans, despite the warnings.

The pair were also at the forefront of urgent moves to help millions of Britons suffering under the strain of rocketing energy prices that have pushed UK inflation to a 40-year high.

Those spending plans allied with the tax cuts sent sterling plunging to its lowest-ever value against the dollar earlier this week, as critics decried the government’s “KamiKwasi” economics. 

– ‘Committed Thatcherite’ –

“There is lots of pressure on Kwasi Kwarteng,” said Tony Travers, a professor at the London School of Economics, who described the minister as a “committed Thatcherite” in reference to former leader and free-market proponent Margaret Thatcher.

“He might have started out as believing in a smaller state and a more deregulated economy, but he’s living in a world where the public expects almost exactly the opposite,” Travers told AFP.

An enthusiastic backer of Brexit, Kwarteng replaced Iraqi-born Nadhim Zahawi, who lasted only two months as chancellor.

Zahawi took over from Sunak, who resigned as finance minister in opposition to Johnson before then losing out to Truss in the contest for 10 Downing Street.

Four years before the 2016 Brexit vote, Kwarteng joined with Truss and other Tory right-wingers to write a free-market manifesto called “Britannia Unchained”, which described British workers as “among the worst idlers in the world”.

He has enthusiastically endorsed Truss’s plans for a “lean state” and to put “money back into people’s pockets”.

In presenting his controversial budget measures on September 23, Kwarteng declared it “a very good day for the UK, because we’ve got a growth plan”.

But disquiet among Tory MPs is growing ahead of the party’s annual conference next week, as opinion polls show voters strongly opposed to the budget plan including its tax cuts for the richest. 

– TV swearing –

In his previous role as energy minister, Kwarteng drew the ire of green groups after he said Russia’s invasion of Ukraine meant the UK needed further investment in North Sea drilling, to diversify its energy mix.

Britain’s first black chancellor of the exchequer, Kwarteng is the son of an economist and lawyer who emigrated to Britain from Ghana. 

The London-born Kwarteng won a scholarship to the elite school Eton, before attending both the University of Cambridge and Harvard University.

While at Cambridge, he represented Trinity College on the long-running quiz programme “University Challenge”, earning his first national media exposure for uttering an expletive when he got a question wrong.

Kwarteng worked as a financial analyst and newspaper columnist before being elected as a Tory MP in 2010.

A former department colleague, Mark Fletcher, said Kwarteng was “fiercely bright and serious” and also a huge cricket fan.

“If you can explain things to him in a cricket analogy you will always get his attention,” he told The Times.

Previously in a relationship with senior Tory MP Amber Rudd, Kwarteng is married to lawyer Harriet Edwards, who gave birth to a daughter last year.

After worrying drone reports and the “sabotage” of Nord Stream’s Baltic Sea pipelines, Europe’s biggest gas supplier Norway is beefing up security at its energy installations, which experts have singled out as vulnerable targets.

As spectacular as they may be, the gas leaks on the Nord Stream 1 and 2 pipelines linking Russia to Germany have no effect on Europe’s energy supply since they were not operational due to the war in Ukraine.

But a sabotage — the favoured theory among European leaders — of this type on Norwegian facilities would have a catastrophic impact on the continent, which is already struggling to meet its energy needs as winter approaches.

Norway has become Europe’s main gas supplier after Moscow cut deliveries in suspected retaliation against Western sanctions following its invasion of Ukraine.

The Scandinavian country has a vast network of pipelines linking it to the continent.

It is currently pumping at full capacity: according to official forecasts, its gas exports could set a record of 122 billion cubic metres this year.

That can be compared to the 150 billion cubic metres of gas per year that Russia supplied to the European Union before the war in Ukraine.

Faced with these stakes, Norwegian police announced Wednesday they were strengthening security measures already in place in the energy sector in a bid to reduce the risk of an attack.

“The situation is being taken very seriously and several measures have already been put in place to guarantee the best security possible”, police official Tone Vangen said in a statement.

She did not provide details, citing security reasons. 

On Tuesday, Petroleum and Energy Minister Terje Aasland made a similar announcement citing “reports of increased drone activity” near offshore oil platforms.

Norwegian energy giant Equinor has reported flights of “unidentified drones near certain installations”, a phenomenon not encountered before now.

“We are taking this very seriously and we have reported it to police,” Equinor spokesman Eskil Eriksen told AFP, providing no further details.

– Gas pipelines a weak link –

Echoing authorities, oil companies said they were taking extra precautions at their platforms, bases and land and sea installations.

Stretching over thousands of kilometres, sometimes at great depths, the oil and gas pipelines are a weak link in the energy supply chain that is so vital to Europe. 

“They are vulnerable, very exposed,” said Tor Ivar Strommen, a researcher at the Royal Norwegian Naval Academy.

He called for the introduction of additional security measures, including regular pipe inspections to ensure that explosives have not been placed there as well as closer monitoring of shipping near pipelines.

Prime Minister Jonas Gahr Store told Norwegian news agency NTB there was “no specific threat against Norway”.

But for professor and director of the Norwegian Institute for Defence Studies, Sven Holtsmark, it was “likely” that Moscow, often accused of using energy as a weapon, would try to sabotage Norwegian infrastructure.

“Before, the idea of Russia attacking Norwegian facilities would have seemed completely absurd, but we can no longer afford to exclude this possibility” in order to undermine European support for Ukraine, he told AFP.

“(Russian President) Vladimir Putin’s toolbox is running out and the war in Ukraine doesn’t seem to be going away any time soon. 

“So to me it makes sense for Putin to decide to sabotage Norwegian facilities, especially as it would be difficult to prove that Russia was behind it,” the expert added.

Global stock markets mostly sank Wednesday and the dollar soared as investors fretted over recession fears and heightened Ukraine tensions.

“With the prospect of a sharp economic slowdown, further pain for households and businesses, and investor sentiment on its knees, alas equities markets continue their descent,” said AJ Bell investment director Russ Mould.

The major Asian markets all closed down, and European stocks were down through afternoon trading.

The US was the exception, with markets edging up slightly at the open.

The British pound slumped 1.7 percent against the haven dollar — despite the Bank of England snapping up UK government bonds to try to bring calm to markets.

However, the UK government’s 30-year bond yield managed to retreat to 4.44 percent, having hit a 1998 peak at 5.14 percent.

The BoE intervention followed rare criticism Tuesday from the International Monetary Fund, which argued that Britain’s recent budget could increase inequality and worsen inflation.

Credit ratings agency Moody’s also waded in overnight with a warning about soaring debt.

New finance minister Kwasi Kwarteng’s tax-cutting plan last week sent shockwaves through markets, pushing the pound to a record low and leading to dire warnings for Britain’s economy.

“The BoE’s intervention is an attempt to soothe investor nerves after they were spooked by last week’s mini-budget,” said City Index analyst Fawad Razaqzada.

– Go-to dollar –

The dollar remains the go-to unit as the US Federal Reserve leads the way in raising interest rates.

Observers are betting that US borrowing costs will peak at around 4.75 percent next year, and are expected to remain elevated for some time.

The prospect of such tight monetary policy has battered equities, as US 10-year Treasury yields — a gauge of future rates — hit four percent for the first time since 2010.

“Fear of tightening-induced recessions has wiped out the recovery we saw in stock markets over the bulk of the summer as investors were once again burned by an over-eagerness to catch the bottom in the market, despite there being little evidence of it being justified,” said OANDA’s Craig Erlam.

“That fear has now gripped the markets and we may see a little more caution going forward,” he said.

Sentiment was also rattled by worries about developments in Ukraine, after Kremlin-installed authorities in four regions under Russian control claimed victory in annexation votes, with Moscow warning it could use nuclear weapons to defend the territories.

Ukraine and its allies have denounced the so-called referendums as a sham, saying the West would never recognise the results.

– Key figures at around 1345 GMT –

London – FTSE 100: DOWN 0.3 percent at 6,984.59 points

Frankfurt – DAX: DOWN 0.3 percent at 12104.37 

Paris – CAC 40: DOWN 0.5 percent at 5,728.16 

EURO STOXX 50: DOWN 0.4 percent at 3,315.49

New York – Dow: UP 0.2 percent at 29,193.25 

Tokyo – Nikkei 225: DOWN 1.5 percent at 26,173.98 (close)

Hong Kong – Hang Seng Index: DOWN 3.4 percent at 17,250.88 (close)

Shanghai – Composite: DOWN 1.6 percent at 3,045.07 (close)

Pound/dollar: DOWN at $1.0655 from $1.0730 on Tuesday

Euro/dollar: DOWN at $0.9587 from $0.9595

Euro/pound: UP at 90.67 pence from 89.39 pence 

Dollar/yen: DOWN at 144.43 yen from 144.81 yen

Brent North Sea crude: UP 0.1 percent at $85.67 per barrel

West Texas Intermediate: UP 1.0 percent at $79.46 per barrel

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