The West continues to introduce many sanctions against Russia, but the value of the ruble is still increasing, and gas and oil are still flowing. It seems that the US and its allies are running out of ways to punish Moscow.
According to Reuters, the West launched a new set of sanctions against Russia after its alleged involvement in the massacre in the town of Bucha on the outskirts of Kiev. However, it seems that the easiest options are now exhausted, and between the allies there is a difference in deciding the next move.
The European Union (EU) has proposed the first move to rein in Russia’s energy sector by banning coal imports. Not to mention oil or gas, vital to the EU’s economy, the decision to ban coal imports has caused divisions within the bloc.
The US and G7 announced new sanctions against Sberbank, many state-owned enterprises, Russian government officials and family members. Washington has also banned people from investing in Russia and banned Moscow from paying debts with money in American banks.
Although the US Treasury Department said sanctions were beginning to turn Russia back into a closed Soviet-style 1980s economy, the ruble rose to a six-week high on April 6.
US sanctions still allow Russia to continue to receive revenue from energy exports.
US Treasury Secretary Janet Yellen said stronger restrictions on Moscow’s energy were not possible because European allies depend on oil and gas from Russia.
Russia supplies about 40% of the European Union’s natural gas, which the International Energy Agency (IEA) estimates is worth $400 million a day. The EU receives a third of its oil imports from Russia, or about $700 million a day.
“We’re in for a bit of pain,” said Benn Steil, international economic director at the New York Council on Foreign Relations. The initial rounds of sanctions were designed to attack Russia without harming the West.”
The divisions in Europe became more apparent this week. After Lithuania announced it would stop importing Russian gas for domestic consumption, Austrian Finance Minister Magnus Brunner spoke out against Moscow’s oil and gas sanctions. Mr. Brunner told reporters in Luxembourg that the sanctions would hurt Austria more than Russia.
President Putin knows the limits of the West
Although the toughest sanctions to date have isolated Russia culturally, diplomatically, economically and sportingly, they have not been able to prevent the Kremlin from conducting a special military operation.
Putin is not worried about being labeled a war criminal by the West because the possibility of him going to court is too remote.
Russia presented evidence before the United Nations, and at the same time claimed that the Bucha incident was a drama staged by the Ukrainian side.
Possessing the world’s largest stockpile of nuclear warheads, President Putin understands that the West does not want to directly intervene in Ukraine because of the risk of nuclear war with Russia.
Western interventions like those done in Kosovo or Libya are not possible in Ukraine, simply because of the strength of the Russian leader’s arsenal.
Sanctions on the Russian economy and the oligarchs could have a debilitating effect in the long run. But clearly they have failed as a deterrent.
The next step
“The lack of consensus on energy import restrictions means that there will be few options for expansion,” said Daniel Tannebaum, a former compliance officer at the Treasury Department’s Office of Foreign Assets Control. However, the investment ban announced on April 6 may prompt many multinational companies to leave Russia.
“The West can absolutely start banning many other areas,” said Mr. Tannebaum.
The United States has been pushing its European allies to inflict more pain on Russia while ensuring that the alliance against President Vladimir Putin does not fall apart. Securing this balance is becoming increasingly difficult for the White House.
Clayton Allen, at political risk consultancy Eurasia Group, said the sanctions were at “a ceiling where the two sides of the Atlantic can be implemented easily and in a short time”.
In order to move to tougher sanctions, Mr. Allen said, the US would need to provide assurances to European countries about stable energy markets and supplies. Mr. Allen added that an economically weak EU will not help anyone. “Western Europe falling into recession will significantly limit the amount of support, both spiritual and material, for Ukraine.”
This week, US Secretary of State Antony Blinken is expected to highlight the Bucha incident for further action at NATO and G7 foreign ministers meetings in Brussels. US Deputy Treasury Secretary Wally Adeyemo held similar meetings last week in London, Brussels, Paris and Berlin.
According to a European diplomat involved in the sanctions negotiations, there are still loopholes that need to be closed, including that German and French companies continue to trade with Russia and hunt for luxury yachts and other assets of Russian oligarchs.