Western nations have warned Russia that it faces harsh economic sanctions for its war on Ukraine.
Putin & Co. are hoping that the lure of Russian oligarchs’ money and Europe’s need for natural gas will weaken the sanctions regime before too long.
How much is the West prepared to sacrifice economically in order to curb Russian aggression?
Can the EU get alternate supplies? The Russian economy is mostly exporting natural gas. It is a two way street.
US & Qatar are the other major suppliers, but making up the gap will be hard.
BTW: US is just barely the largest supplier, I was surprised to recently learn this. Qatar is second and Russia is third.
In theory some EU countries can increase supply for a bit. Basically North Sea resources and the Netherlands has restrictions in place that can be relaxed for the duration.
Also helping is winter is beginning to let up.
I believe that at least the US is trying to avoid sanctions that could have a significant effect on gas prices at home.
It seems like there’s no appetite in the current economic/societal situation to really go to the mat with the economic consequences. Although this response already seems to be more significant than the one after Georgia or Crimea.
Isn’t the question, how much of an economic (defined broadly) cost with the West incur as the result of sanctions, as opposed to the economic cost of other actions - or inactivity?
Just pointing out the obvious, I’m sure. But different political sells are required to justify increased prices at the gas pump/home heating bills vs military budgets. But the costs may be similar.
It is not in the interests of any party to stop the Natural Gas flowing. Supplies are negotiated long term and Russia maintains it will honour all these contracts. These are a major source of income for the Russian economy.
There are LNG terminals connected to the extensive European gas network that are supplied by LNG tankers from Qatar, Libya and the USA. But there is insuffcient capacity to completely replace the huge volumes of Russian gas should the taps be turned off.
There is huge concern about the high price of NG at the moment on the ‘spot’ market because of huge demand in Asia as the their economies emerge from lockdowns.
This is becoming a big issue in the UK, though it gets most of its gas from its own supplies in the North Sea and by pipeline from Norway.
Infrastructure takes a long time to build and the strategy is to move to low carbon and renewables.
All this is a long term strategic energy policy. Russia, meanwhile knows eventually its gas customers will be in Asia. It is also building pipelines to China and LNG terminals to sell to the rest of the world.
Nord Stream 2 is an $11billion pipeline that goes direct from Russia to Germany. If it becomes operational the volumes moved using the pipelines crossing the Ukraine could be reduced and the $1billion a year in transit fees could fall and have a big economic effect. It could lead to the Ukraine becoming highly dependent for its domestic gas supplied from Russia. Putin would surely be hiking the prices and turning the taps on an off.
While Russia has an economy dominated by Oil and Gas, it is managing it rather better most countries in that position. The extensive European gas network means that there is a certain amount of flexibility in the system. Flows down piplelines can be reversed. Pipelines are carrying millions of dollars of trade between countries each day.
You can bet that all the foreign policy advisors have factored all this in to their deliberations. Besides heating homes in the cold northern winter, the gas is used in power stations for electricity to keep the lights on. It is cleaner than coal. This is the ‘gas bridge’ strategy for the transition to renewables.
As a sanction against Russia it leaves a lot to be desired in the short to medium term.
Russia depends on the international financial markets…but it does have rather a lot of reserves at the moment ($630Billion).
A serious invasion of Ukraine would be enormously expensive if the US Iraq invasion is anything to go by.
Curtailing the activities of the Russian Oligarchs who have sought influence in the political elites that run the European democracies could be a sanction.
But from a UK perspective, the ruling Conservative party is mindful that Russian money accounts for some significant contributors to the party fiances.
Things would have to get very serious for Boris Johnson implement effective sanctions. But there will be no shortage of empty rhetoric and bluster.
I would not be surprised if Putin makes a few phone calls and there are protests against repression amongst the Russian speaking minorties in the Baltic states. He has played that card before.
NATO can also rattle the sabre if necessary.
We may see a return to ‘missile diplomacy’. Arming Ukraine with effective missile system and drone systems is a card that can be played.
As for sanctions…,there is a big international football match coming up in Russia in Putin’s home town St Petersburg.
If that were cancelled, it would really send a strong message.
The biggest sanctions hammer might be one held by one of NATO’s smallest members; Belgium. They could disable SWIFT international payment transactions to and from Russia.
So my read is that basically every NATO country waved the white flag on that at the beginning of this crisis.
Almost as soon as this crisis entered public knowledge, even the more hawkish NATO members including the US were indicating they would ramp up the arming they have been doing and use sanctions as a deterrence.
Obviously everyone is trying to avoid anything close to a direct conflict between NATO and Russia to avoid the risk of nuclear war, and I think the means either NATO needed to do something like supply missiles or get an agreement to station NATO troops there very early, while it was still obvious that they were making the first move and Russia would be the one risking nuclear war by invading. I think we’re still in a mode where once one nuclear power claims some region as theirs to fight over, their rival nuclear powers have to stick to deterrents that are not even close to an actual shooting war between nuclear powers.
That’s Biden and NATO’s long game, I suspect. The Russians may be able to finance some kind of blitzkrieg-style quick Desert Storm type war, but they probably can’t finance anything beyond decisively curb-stomping the Ukrainians outright in a matter of weeks. Certainly not a protracted insurgency or drawn out conventional war.
I think Putin is happy with weak or failed states to his west as long as they aren’t NATO-aligned states. He’s probably happy to break stuff and not take an active role in nation-building if it would be too expensive.
This article opines that rather than the oligarchs - who are essentially Putin’s clients and so in no position to put any pressure on him - we should be targeting:
Russia’s ruling class – the members of the Duma, the Senate, the presidential council, the top echelons of the security and defence services, top state television employees – is several thousands strong. These men (and some women) draft, rubber-stamp, promote and carry out Putin’s decisions. Some of them also – unlike the oligarchs – actually advise him.
Being a member of the Duma or Senate is a pretty cushy number – you are well-paid, you can make an occasional speech if you wish, but you are basically there to vote for the Kremlin’s decisions, and, above all, you can extort as many bribes as you can cope with. (For this reason they are detested by a majority of Russians.) Members of the presidential council are civil servants, essential for the preparation of legislation. The security services play crucial roles in executing Putin’s vision. And TV propagandists spread disinformation.
These are the people to target – because when several thousand of the people Putin actually depends on begin to feel the consequences of his policies in their personal lives, there will be a groundswell of discontent.
Most of these people love to travel to Europe and the US. They educate their children here. They own properties here. The members of the Russian elite, their families and children, love to swan around on yachts, ski slopes and fine hotels in the west, posting pictures of themselves on Instagram. If they are denied visas to travel to the west – if they are effectively imprisoned in Russia – it will not take long for the discontent to permeate the entire political class. The message to them will be clear: if you want to enjoy your western lifestyles, you need a new leader who respects western values; until then, you’re banned.
The added value of this approach is that, unlike some economic sanctions, it will not harm ordinary Russians, in fact it will delight them.
If any kind of sanctions are going to have an effect, it is these. Forget the oligarchs; go for the political elite.
Yup.
That does run the risk of SWIFT ceasing to be seen as a neutral banking network and an instrument of foreign policy.
An issue which has already risen due to Iran sanctions.
China just announced that it will be upping its wheat and other grain imports from Russia, which will probably go pretty far to mitigating any sanctions the west imposes, along with the already planned increase in gas, oil, and coal imports from Russia. I’m not sure that anything that the west would be willing to impose would actually hurt the Russians that badly in the face of something like that.
The gas pipeline network from Russia to Europe can move a lot more gas than the long pipeline to China. China will drive a hard bargain.
I’m sure they did drive a hard bargain since Russia needs them and needs them to buy stuff a lot more than China needs Russia or Russian gas.
China is setting things up to make it very hard for Russia to refuse returning Vladivostok and the surrounding region. Let Russia expend its military while becoming more economically dependent on China. Russia affirms that countries may revanche territory. Russia won’t have to the economy, military, nor allies to resist China. And China is patient; they won’t force the issue until Putin is dead and would-be successors are in contention.
In any case, sanctions are not a short-term tool. Sanctions will not prevent the subjugation of Ukraine. But they are a deterrent to future expansion, and are a bargaining chip.
Sanctions are also a way for countries to express their displeasure of gross violations of international law and sovereignty. Countries that don’t agree on anything else will agree that conquering neighbors is wrong.
I just read an article that said Russia might be able to evade sanctions by using cryptocurrency.
How could it not be cancelled? It seems like literally the least the international community could do.
Serious question: When have sanctions ever actually worked? We’ve been sanctioning various governments around the world for decades now, and I can’t think of any case in which those sanctions had any significant effect.
North Korea has been almost entirely cut off from the world economy since the cease fire agreements of the Korean War. As much as life there sucks, they still maintain control of their nation, and have actually become a nuclear power despite sanctions.
Vietnam was under sanctions for about two decades after the Vietnam war. As with NK, life sucked for a long while there, but they survived, and now seemed quite thriving from when I visited 3 years ago. Sanctions ended largely because the US finally stopped being quite so buttthurt about how the war ended, it had nothing to do with Vietnam changing their behavior.
Iran has been under some kind of sanction or other since 1979, and again, it didn’t seem to do much of anything to control their behavior. There was some improvement because of the Iran nuclear deal, but in that, it involved not just Iran making compromises, but the western powers as well. a few years of the carrot did what decades of the stick could not. And even that fell apart when Trump got all butthurt and took back the carrot. We went back to failing with the stick.
And those are just the major examples of the current western parties failing at “sanctions”.
Trying to destroy the economy of England was a primary goal of the German U-Boat fleets in both the World Wars. Despite the huge amount of shipping that they sent to the bottom of the Atlantic, it didn’t work. England made do with what it had, until they figured out how to get the supplies through. I can’t see any economic sanction being more effective than the U-boat blockades.
I’d expel Russian ambassadors from every capital. I’d kick them out of the UN. And I’d start prosecution of Putin at the International Court of Justice in The Hague.
I think our expectations are different, because to me those are all examples of sanctions working. Sanctions are never going to cause regime change or capitulation. They’re intended to weaken a country’s economy and they do that well.