Oil Sanctions Against Russia Are a Must
March 23, 2022
https://cepa.org/oil-sanctions-against-russia-are-a-must/
Sometimes sanctions hurt the West as well as the targeted regime, but that cannot be a reason to hesitate.
Short of direct military involvement, oil sanctions represent the single most important policy instrument available to the West to sway Russian President Vladimir Putin’s political calculus. They are a tool that needs to be wielded resolutely.
Last year, Russia's total exports reached $489.8bn. Of that, energy (in the form of crude oil, pipeline natural gas, and liquified natural gas) accounted for roughly half, nearly $241bn, with the lion’s share generated by the sale of oil. Last year's average price of oil was $68 per barrel, and with the price of oil soaring (benchmark Brent crude was about $115 a barrel on March 22), it is providing the Kremlin far greater funds to fuel its aggression in Ukraine.
To be sure, the sanctions invoked so far on the Russian financial system, oligarchs, and certain industries will cause serious harm to the economy in the long run. They will also have an immediate effect on the wealth of oligarchs and the living standards of ordinary citizens. However, they will not deliver a fatal blow to the Putin regime as long as oil revenues flow into Russia. That’s because these funds oil Putin’s machine; they keep his security apparatus operating, and allow him to provide at least basic services to Russian citizens, thereby keeping their level of discontent low.
Based on this realization, the Biden administration on March 8 announced that it was banning the import of Russian oil, natural gas, and coal. So far, however, Europe has not followed suit.
Critics on the continent have opposed energy sanctions on the grounds that they would do serious economic damage given the reliance of many countries on Russian fuels. Indeed, Europe’s dependency on Russian energy has been a topic of perennial concern in recent years – but little concrete action. Germany is the largest importer, by product value, of Russian oil within the European Union. In 2021, the total EU energy import value from Russia stood at some $150bn, of which $104bn was for oil products. Germany was the largest importer at an estimated $23.6bn worth of crude oil, gasoline, and diesel.
As a result, European nations would undoubtedly feel the pinch if they went ahead with energy sanctions against Russia. As German Chancellor Olaf Scholtz said on March 7, Russian energy imports had to continue for now because oil and gas “cannot be secured in any other way.”
It is true that sanctions would hit Europe hard — EU states rely on Russia for 40% of energy supplies. Any such discomfort, however, needs to be balanced against new global realities — and the likely long-term economic and geopolitical costs if the current war in Ukraine continues.
Here, it’s necessary to clarify the nature of the energy business, and oil in particular. Oil is a global commodity, which means that there is a global oil market where prices are determined by supply and demand. In this regard, oil is different from natural gas, which is more a regional commodity and is characterized by price fluctuations in different markets.
As a result, a blanket Western ban on Russian oil won’t serve to take Russian oil off the streets — the Kremlin will simply sell to other consumers (like China.). But a joint U.S.-European ban would significantly constrict the potential buyers, while market forces will do the rest — with alternate clients negotiating cut-rate prices, knowing that the Kremlin has precious few options. The result will be a drastic slump in Russian oil income.
Such a move will admittedly not be cost-free for Europe. In the short term, the continent is likely to experience price hikes and commodity shortages. But equilibrium will be restored in time – and in a manner that disadvantages Russia.
Most of all, European leaders need to understand that the long-term costs of inaction are liable to be measured in both economic pain and humanitarian suffering, as oil revenue continues to fuel Putin’s war machine. Officials in Brussels have the ability to alter this equation, if they have the political will to do so.
Mamuka Tsereteli is Senior Fellow for Eurasia at the American Foreign Policy Council in Washington, DC.
News
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CACI Chairman S. Frederick Starr comments on "Preparing Now for a Post-Putin Russia"
Whether Russian President Vladimir Putin dies in office, is ousted in a palace coup, or relinquishes power for some unforeseen reason, the United States and its allies would face a radically different Russia with the Kremlin under new management. The geopolitical stakes mean that policymakers would be negligent not to plan for the consequences of a post-Putin Russia. On November 2, 2023, CACI Chairman S. Frederick Starr joined a panel organized by the Hudson Institute’s Center on Europe and Eurasia for a discussion on how US and allied policymakers can prepare for a Russia after Putin.
Click here to watch on YouTube or scroll down to watch the full panel discussion.
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Central Asia Diplomats Call for Closer Ties With US
REPRINTED with permission from Voice of America News
By Navbahor Imamova
WASHINGTON -- U.S.-based diplomats from Central Asia, a region long dominated by Russia and more recently China, say they are eager for more engagement with the United States.Many American foreign policy experts agree that a more robust relationship would be mutually beneficial, though U.S.-based nongovernmental organizations express deep concerns about human rights and authoritarian rule in the five countries: Uzbekistan, Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan.
Michael Delaney, a former U.S. trade official, argued in favor of greater engagement this week at a webinar organized by the American-Uzbekistan Chamber of Commerce.
He noted that three of the five republics are World Trade Organization members and the other two are in the accession process — a goal actively encouraged by the U.S. government.
"I've always believed that this is a geographically disadvantaged area. There are relatively small national economies," he said. But, he said, collectively the region represents a potentially more connected market, about 80 million people.
Key issues
In this virtual gathering, all five Central Asian ambassadors to Washington expressed eagerness to work on issues the U.S. has long pushed for, such as water and energy sustainability, security cooperation, environmental protection and climate, and connectivity.
Kazakhstan's Ambassador Yerzhan Ashikbayev said that despite all factors, the United States does not want to leave the field to China, its global competitor, which actively invests in the region.
"Recent visit by 20 companies to Kazakhstan as a part of certified U.S. trade mission, including technology giants like Apple, Microsoft, Google, but also other partners like Boeing, have shown a growing interest," Ashikbayev said.
The Kazakh diplomat described a "synergy" of economies and diplomatic efforts. All Central Asian states are committed to dialogue, trade and multilateralism, he said. "As we are witnessing the return of the divisive bloc mentalities almost unseen for 30 years, it's in our best interest to prevent Central Asia from turning into another battleground of global powers."
During his first tour of Central Asia earlier this year, Secretary of State Antony Blinken visited Kazakhstan and Uzbekistan, meeting separately with the foreign ministers of all five countries.
That was deeply appreciated, said Meret Orazov, Turkmenistan's longtime ambassador, who also praised the regular bilateral consultations the U.S. holds with these countries.
Uzbek Ambassador Furqat Sidiqov sees the U.S. as an important partner, with "long-standing friendship and cooperation which have only grown stronger over the years."
"The U.S. has played a significant role in promoting dialogue and cooperation among the Central Asian nations through initiatives such as the C5+1," he said, referring to a diplomatic platform comprising Washington and the region's five governments.
"This is where we address common concerns and enhance integration," said Sidiqov. "We encourage the U.S. to bolster this mechanism."
Tashkent regards Afghanistan as key to Central Asia's development, potentially linking the landlocked region to the markets and seaports of South Asia. Sidiqov said his country counts on American assistance.
'Possibility of positive change'
Fred Starr, chairman of the Central Asia-Caucasus Institute in Washington, ardently advocates for the U.S. to adopt closer political, economic and people-to-people ties with the region.
In a recent paper, he wrote that among dozens of officials, diplomats, entrepreneurs, experts, journalists and civil society leaders interviewed in Central Asia, "even those most critical of American positions saw the possibility of positive change and … all acknowledged that the need for change is on both sides, theirs as well as ours."
This is the only region that doesn't have its own organization, said Starr, arguing that the U.S. could support this effort. "We have not done so, probably because we think that this is somehow going to interfere with their relations with their other big neighbors, the north and east, but it's not going to. It's not against anyone."
"Easy to do, low cost, very big outcome," he added, also underscoring that "there is a feeling the U.S. should be much more attentive to security."
"Japan, the European Union, Russia, China, their top leaders have visited. … No U.S. president has ever set foot in Central Asia," he said. He added that regional officials are left to wonder, "Are we so insignificant that they can't take the time to visit?"
Starr urges U.S. President Joe Biden to convene the C5+1 in New York during the 78th session of the U.N. General Assembly in September. "This would not be a big drain on the president's time, but it would be symbolically extremely important," he said. "All of them want this to happen."
Read at VOA News -
Read CACI Chairman S. Frederick Starr's recent interview on the resurgence of Imperial Russia with The American Purpose
Why Russians Support the War: Jeffrey Gedmin interviews S. Frederick Starr on the resurgence of Imperial Russia.
The American Purpose, May 23, 2023
Jeffrey Gedmin: Do we have a Putin problem or a Russia problem today?
S. Frederick Starr: We have a Putin problem because we have a Russia problem. Bluntly, the mass of Russians are passive and easily manipulated—down to the moment they aren’t. Two decades ago they made a deal with Vladimir Putin, as they have done with many of his predecessors: You give us a basic income, prospects for a better future, and a country we can take pride in, and we will give you a free hand. This is the same formula for autocracy that prevailed in Soviet times, and, before that, under the czars. The difference is that this time Russia’s leader—Putin—and his entourage have adopted a bizarre and dangerous ideology, “Eurasianism,” that empowers them to expand Russian power at will over the entire former territory of the USSR and even beyond. It is a grand and awful vision that puffs up ruler and ruled alike.
What do most Russians think of this deal? It leaves them bereft of the normal rights of citizenship but free from its day-to-day responsibilities. So instead of debating, voting, and demonstrating, Russians store up their frustrations and then release them in elemental, often destructive, and usually futile acts of rebellion. This “Russia problem” leaves the prospect of change in Russia today in the hands of alienated members of Putin’s immediate entourage, many of whom share his vision of Russia’s destiny and are anyway subject to Putin’s ample levers for control. Thus, our “Putin problem” arises from our “Russia problem.”
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CACI director Svante Cornell's interviewed on the 'John Batchelor Show' podcast regarding Turkey's 2023 presidential election
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New Article Series on Changing Geopolitics of Central Asia and the Caucasus
