Oil is all Russia’s economy has left following its invasion of Ukraine earlier this year, according to Amos Hochstein, special presidential coordinator for President Joe Biden.
“Oil is the only thing they have left in that economy … Putin has destroyed the rest of the economy,” Hochstein told CNBC’s Hadley Gamble Monday.
“All he’s got left is the stuff that comes out of the ground. He won’t sell his gas to Europe anymore, so all he has is oil, so that’s what funds this war.”
The Russian Embassy to the U.K. was not immediately available to respond to the comments when contacted by CNBC.
The Russian economy shrunk by 4% year-on-year over the second quarter, and the Central Bank of Russia expects the downturn to deepen in the quarters ahead. The International Monetary Fund expects Russia’s GDP to contract by 3.4% in 2022.
Hochstein’s comments, from the ADIPEC conference in Abu Dhabi, come at a volatile time for energy markets following Russia’s invasion of Ukraine in Feb. 2022.
Russia was the biggest supplier of both natural gas and petroleum oils to the EU in 2021, according to Eurostat, however gas exports from Russia to the European Union have slid this year.
“Despite available production and transport capacity, Russia has reduced its gas supplies to the European Union by close to 50% y-o-y since the start of 2022,” according to the International Energy Agency.
As such, Hochstein stressed the importance of acting now to ensure a more secure environment for the development of future technologies within the energy sector.
“Fortunately or unfortunately, energy today is the number one issue in the world,” he said. “And you know, we’re here talking about oil and gas, but the energy transition — look what we just passed in the United States, the largest climate investment, which matches well with what countries like the UAE is doing, and some other countries around the world.”
He added that these investments, into supply chains and the future of energy more broadly, had to be done “today.”
“So that we don’t end up with the same geopolitics of energy for renewables and for electric vehicles as we had in the 20th century in oil and gas,” he added.
— CNBC’s Elliot Smith contributed to this report.