May 17, 2022
The Right Way to Sanction Russian Energy
Western sanctions are beginning to hit Russia where it hurts most: its energy exports. Over the last few weeks, the European Union, the biggest buyer of Russian oil, has been working on a plan to ban imports by the end of this year, although objections by Viktor Orban of Hungary have slowed progress.
For energy sanctions to work, however, they must be carefully designed to hurt Russia more than they hurt Western states. Their primary goal should not be to cut the volume of oil and gas leaving Russia, which would further drive up world energy prices and endanger domestic support, but to reduce the dollars and euros flowing into Russia. Moving forward, the EU should therefore focus collective efforts on a more ambitious approach: partnering with the United States and other allies to impose a global regime, backed by the threat of secondary sanctions, to cap the price of Russian oil and slash the Kremlin’s revenue.
Allied states must figure out how to slash Russian energy revenue without damaging the global economy.
Prior rounds of sanctions against Moscow restricted investment and technologies destined for Russia’s energy sector, targeting the country’s refineries and its construction of liquefied natural gas infrastructure. Canada, the United Kingdom, and the United States also banned Russian energy imports, but this had limited impact because all three were small consumers of Russian oil and gas. Until recently, the biggest buyer of Russian energy—the EU—not only declined to sanction energy exports but also designed its financial sanctions to explicitly allow Russian fuel to keep flowing.
But now, the Russian-European energy relationship is unraveling. On top of its discussions about phasing out Russian oil imports, the EU also announced plans to completely end Russian natural gas imports over the coming years. Europe buys slightly over half of all Russian exports of crude oil and refined products such as gasoline, diesel, and jet fuel. Taxing these exports, meanwhile, currently provides around a quarter of Moscow’s budget. The EU effort to halt Russian oil purchases therefore represents a dramatic and welcome shift in the global response to Russia’s invasion.
Read the full article from Foreign Affairs.
More from CNAS
-
Indo-Pacific Security / Energy, Economics & Security
Trump Unfriends Modi's India: Trump Frothing, India CalmFrom tariffs to tantrums-Trump's latest anti-India tirade stirs global concern. As Washington watches in disbelief, Shiv Aroor discusses what this "break-up" means for India-U...
By Daniel Silverberg
-
Indo-Pacific Security / Energy, Economics & Security / Technology & National Security
Selling AI Chips Won’t Keep China Hooked on U.S. TechnologyU.S. policy should not rest on the illusion that selling chips can trap China inside the American tech ecosystem....
By Janet Egan
-
Energy, Economics & Security / Technology & National Security
What the U.S.-EU $40 Billion Chip Deal MeansThe U.S.-EU framework exemplifies a recurring challenge in modern trade diplomacy: the tension between political symbolism and operational substance....
By Pablo Chavez
-
Transatlantic Security / Energy, Economics & Security
LISTEN: Why It’s So Hard to Go After Russia’s Oil RevenueEmily Kilcrease, senior fellow and director of the Energy, Economics, and Security Program at the Center for a New American Security, joins the show to talk about secondary ta...
By Emily Kilcrease