May 02, 2014
The playbook for sanctions on Russia
The newest round of sanctions on Russia sets the right tone for potential escalation of pressure if the political crisis in Ukraine deteriorates further. Hit President Vladimir Putin's inner circle of cronies and companies, but leave the energy taps on. Turning them off is impossible and unnecessary. There is a long path of painful sanctions short of direct bans on Russian energy supplies that could cripple the Russian energy sector and make its economy bleed.
The latest round of Russia sanctions, announced April 28, show that the Obama administration is willing to target the energy sector as a key point of leverage against Moscow. That Russia is the eighth-largest economy, and No. 3 in oil production and No. 2 in gas production globally, is apparently not a roadblock for energy sanctions. Energy and economic concerns -- for example about the potential effects of sanctions on global energy prices and Europe's heavy reliance on Russian natural gas and oil -- have yielded to diplomatic and security imperatives.
Some believe that the energy sanctions are symbolic. Oil prices and shares of oil companies operating in Russia did not move dramatically after the announcement of the new restrictions. But such a reading misunderstands this opening foray and underestimates the opportunities available to calibrate sanctions.