Rushed economic sanctions against Russia are not working for EuropeFriday September 09 2022
When the West imposed economic sanctions against Russia upon its invasion of Ukraine in February this year, it expected to economically cripple Russia’s economy, especially oil and gas export revenues. Six months after sanctions imposition, it is evident that it is Europe more than Russia that is suffering from impacts of the sanctions.
Recently, as Europe was pronouncing plans to eliminate imports of Russian oil and gas by year-end, Russia was switching off gas supplies through Nord Stream One pipeline months before Europe is fully ready with alternative supplies.
It is President Vladimir Putin of Russian who is finally applying his energy weapon against Europe, which has previously imported from Russia 40 percent of its natural gas and 25 percent of oil demands.
Disruption of Russian oil and gas supplies has pushed Europe into a serious energy deficit, high energy costs, inflation, industrial slowdown, and looming threats of internal political unrest, especially as winter approaches.
Russia’s revenues have remained mostly unchanged as reduced volumes are compensated by higher prices. And Putin may just be smiling as Europe suffers unintended consequences of the sanctions. The US has remained mostly unaffected by sanctions, benefiting instead by exporting liquefied natural gas to Europe to fill the void created by Russia.
The West may have inadvertently rushed into economic sanctions against Russia without sufficiently evaluating critical Russian pushback scenarios. Potential reactions of global oil and gas markets and geopolitical realities were not sufficiently analysed.
All along, Russia appears to have ready reactions to every sanction, with the West reacting with frequent revisions to sanctions.
The latest proposal by the West to impose caps on prices paid for Russian oil and gas imports is unlikely to work, considering the influence of OPEC members, China, and India, all of whom are sympathetic with Russia. Oil from Russia has continued to find alternative markets in China and India.
However, the extent of remedial changes already done and planned by Europe on their energy supply chains cannot be reversed and will conclusively sever dependence on Russian energy sources. This will permit Europe to plan their energy transition which will expedite renewable energy projects and programmes.
For its part, Russia will definitely re-engineer its future economy to be less dependent on hydrocarbons exports, and more into industrialisation and high technology.
For Europe and Russia, these are the long-term consequential benefits from the Russian-Ukraine war and the rushed economic sanctions. For the rest of the world, any economic disaster in Europe will have knock-on impacts.