Eni CEO Descalzi urges EU to halt ban on Russian gas

(Alliance News) - War in Iran and the potential closure of the Strait of Hormuz represent "the most significant event of the last 40 years," according to Eni CEO Claudio Descalzi. As reported by Corriere della Sera on Monday, such a scenario warrants extraordinary measures to manage an unprecedented energy crisis.

Among these measures, the executive proposes suspending the European ban on Russian LNG - totaling 20 billion cubic meters - currently set to take effect on January 1, 2027. This stance aligns with the Lega party, while Democratic Party leader Elly Schlein has reaffirmed her opposition to resuming gas purchases from Russia, citing the conflict initiated by Vladimir Putin.

Under rules approved by the 27 EU member states, the ban on Russian LNG is scheduled for early 2027, while the pipeline gas phase-out is slated for the autumn. The proposed suspension aims to prevent a supply-demand imbalance exacerbated by reduced Middle Eastern flows. However, Descalzi offered reassurances regarding Italy: the 6.5 billion cubic meters sourced from Qatar could be offset by flows from Angola, Nigeria, Congo, and the Americas.

The most critical issues concern jet fuel and diesel. Europe consumes approximately 60 million tons of aviation fuel, importing 35% of its requirements, and must now secure new supplies while assessing price impacts. The problem is intensified by the closure of 36 refineries in recent years, which has eroded production self-sufficiency. "We are in a situation where you either have the capacity to produce what you need, or you are at risk," Descalzi warned, highlighting the reliance on foreign sources.

Signs of strain are also emerging in the diesel network: "Last weekend, diesel was sold out at 600 of our service stations," he explained, attributing the shortage to excessively low prices and surging demand. The scarcity of available crude, which has contracted by approximately 12 million barrels since the outbreak of the conflict, further complicates the outlook.

A potential naval blockade of the Strait of Hormuz, suggested by Donald Trump, risks removing an additional 1.5 million barrels per day exported by Iran, primarily to China, from the market.

This scenario is already widening the gap between the financial and physical oil markets: WTI futures for June delivery have fallen to USD95.2, while spot cargoes have hit an all-time high of USD144 per barrel. "The physical oil market in Asia is at USD150 per barrel, and cargo goes where it fetches the highest price; therefore, the issue is not prices, but volumes," Descalzi observed.

Looking ahead, a prolonged conflict could drive prices even higher, weighing on equity markets and triggering a flight to safe-haven assets like the US dollar. In the absence of new supply, the only possible rebalancing would come from a contraction in demand - effectively an economic recession - a prospect already raised by Economy Minister Giancarlo Giorgetti and Industry Minister Adolfo Urso.

By Antonio Di Giorgio, Alliance News reporter

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