The European Union tightened the screws on Russia’s economy Friday.
The latest set of sanctions includes an import ban on Russian coal, seafood, wood, liquor, and rubber, as well as export restrictions to Russia of quantum computers, semiconductors, high-end electronics, and transportation equipment. In total, the fifth round of sanctions removes an additional $25 billion from the EU-Russia bilateral trade relationship. Largely due to resistance from Germany, the EU coal ban will begin in mid-August, giving the bloc roughly four months to wind down existing contracts.
The purpose of the EU’s sanctions campaign isn’t to merely bankrupt the Russian economy, which is set to contract by perhaps 15% this year. The objective is to push Russian President Vladimir Putin toward ending his war in Ukraine and withdrawing the more than 150,000 Russian troops who are bombarding the country’s cities. Putin, however, is nowhere near contemplating such a withdrawal. Also on Friday, a Russian missile slammed into a crowded train station in the Ukrainian city of Kramatorsk, killing at least 50 people. And while peace negotiations between Kyiv and Moscow are continuing (and indeed should continue), there are conflicting interpretations on whether they are going anywhere.
The EU is therefore searching for more sanctions levers it can pull. The only problem is that the bloc, which has been quite unified thus far, is starting to fracture on when, how, or even if Russian oil and gas exports should be the next target on the list.
Economically, a European embargo on Russian crude and gas would make sense. The economic effect on Russia of an energy embargo would be significant. The EU has purchased nearly $40 billion worth of energy products from Russia since Feb. 24, the day the war in Ukraine began. The Kremlin would stand to lose hundreds of billions of dollars in revenue if Europe clamped down on the energy trade. Some of this revenue could be made up by increasing exports to energy-thirsty China, but Moscow would have to offer deep discounts to make such deals attractive. And that’s assuming Beijing would be interested in increasing imports, which may not be the case.
Top line: If stopping purchases of Russian energy were easy, Europe would have done it already. But the reality is that such a dramatic shift wouldn’t be smooth for EU members, some of whom (such as Germany, Hungary, and Italy) are dependent on Russian energy to keep their economies churning. According to the latest statistics available, the EU imported nearly 47% of its natural gas and 25% of its crude oil from Russia in the first semester of 2021. For some countries, including Germany, the share is even higher.
As frustrating as it is to Washington (which cut off Russian oil and gas last month) and some EU members such as Poland and the Baltics, you can’t blame the EU for proceeding cautiously. Germany, the EU’s economic powerhouse, could shave as much as 3% off its GDP if it decided to stop buying Russian energy. To expect Germany to act as quickly as the United States is absurd — the U.S., after all, received a small portion of its total energy supplies from Russia.
For Ukrainians, the ultimate victims of Russia’s war, none of this causes much sympathy. Ukrainian President Volodymyr Zelensky and his senior advisers have spent weeks screaming at Europe to free itself of Russia’s energy chokehold. The EU may eventually come around to the proposition, just as they came around to freezing Russia’s foreign reserves, kicking large Russian banks from the SWIFT payments system, banning Russian cargo operators from European soil, and blocking Russian vessels from sailing into EU ports. If Russian troops continue to commit further war crimes, the bloc may seriously look at sealing itself off from the Russian energy market.
But it isn’t happening yet, and it’s pretty clear why.
Daniel DePetris (@DanDePetris) is a contributor to the Washington Examiner’s Beltway Confidential blog. His opinions are his own.
