The writer is the main economic advisor to President Volodymyr Zelenskyy of Ukraine
Western sanctions on Russia’s fossil fuels are a specter. Revenue flowing into the Kremlin’s coffers from overseas sales of oil, gas and coal was so high that it doubled in the first 100 days of the war. The Western energy sanctions regime doesn’t work. It’s for a very simple reason – it doesn’t exist.
Before Vladimir Putin’s all-out invasion of Ukraine in February, Russia was comfortably the world’s largest exporter of fossil fuels. Today, the company can sell oil, gas, and coal directly to every country except the United States, which was an insignificant customer at first.
Some influential American and European commentators assert that restrictions on Russian oil exports are inflicting pain on ordinary citizens in Western countries without reducing electricity revenue. Kremlin. They argue that Western sanctions have backfired.
However, the measures taken by the West to date represent less than 5% of Russia’s pre-war crude oil exports. Crude oil exports by sea, although down since mid-June, are still higher than they were at the start of the invasion. In large part, that’s because Russian oil imports into the EU and UK are legal and will remain so until at least December. Every week, between 10 million and 20 million barrels of crude oil arrives in Europe from the EU countries. port of Russia as traders turned the so-called “early stage” into a feeding frenzy.
Even in the US, the only country with sanctions on the direct imports of Russian oil, motorists – perhaps without knowing it – are continuing to pour Russian-origin gasoline into the tanks. Their car. Can only be described as a global washing operation, Russian crude oil is sent to foreign refineries and then imported into the US as gasoline. Once oil has been refined into other products, it can legally enter the US without violating sanctions.
The UK will also continue to import millions of barrels of Russian mixed oil in the coming months. This trade is likely to continue even after the UK ban comes into effect later this year. This is possible because of rules that allow companies to import CPC Blend, crude oil that is a mixture of Kazakh and Russian products, transported through the Caspian Sea pipeline.
These are hardly the sanctions Americans and Britons are right to expect when President Joe Biden and Boris Johnson, the outgoing prime minister of the United Kingdom, announced the sanctions in March. The failure to impose a real embargo on Russian oil and gas is increasing Putin’s revenue and funding war crimes in Ukraine.
To some extent, today’s high energy prices reflect traders’ predictions that restrictions on Russian oil are about to ease. But crude oil prices rose for months before the invasion and before the West announced any sanctions.
In addition, the prices of West Texas crude and Brent crude have been falling steadily since the beginning of June, just as Russian crude exports began to decline. Claims that current oil prices are the result of minimal restrictions imposed by Western governments on Russia’s fossil fuel exports have not been scrutinized.
The big energy companies, which have posted huge profits over the past six months, are more responsible for the pain energy consumers are feeling. Companies like BP & Shell in the UK, which made $8.5 billion and $11.5 billion in April-June, respectively, and Wintershall in Germany, which made $1.9 billion, are in business. The performance is good, but these returns are nothing new to the industry. This is an industry that has generated incredible profits every day for the past 50 years.
In recent days, EU and UK policymakers have alleviate their existing limitations. They created a straw man in their sanctioning regimes. If there is no chance for sanctions to work, they are dismantling them. This slide rewards Putin even as his forces commit atrocities in Ukraine and as Russia expands its territory for illegal purposes. war.
Ukraine will never forget the support our partners have given us. But for fossil fuels, the West faces an obvious choice. Anyone serious about their support for Ukraine must stop funding Putin’s regime. Business as usual served only to prolong the war, which had affected the entire global economy. The most effective solution must include a complete and immediate embargo on Russian fossil fuels in Europe and the prompt enactment of G7 proposals for a global price cap for Russian oil.
The sooner Putin is contained, the faster we can get on with the reconstruction of Ukraine. That means keeping Russia’s fossil fuels in the ground and making virtual energy sanctions a reality.