On Breakingviews: Putin’s invasion of Ukraine triggered a barrage of economic reprisals from the U.S. and its allies, some are pushing for more restrictions on oil and gas exports. Doing so would carry big economic risks, writes Hugodixon
Western supplies of military kit to Ukraine – including last week’s decision by the U.S. and German governments toExport controls on military-useful equipment, including dual-use technologies such as semiconductors, have also degraded Putin’s war machine. Now loopholes are starting to appear, such as supplies of chips from China, according to aEconomic sanctions have played a smaller role in curbing Putin’s power.
By contrast, sanctions on Moscow’s exports of oil and gas have so far done more harm than good. They haven’t crippled Russia’s economy and haven’t forced Putin to withdraw.In the initial aftermath of the invasion, Western allies mostly issued threats to stop buying Russian oil and gas. That still helped push up energy prices, giving Putin a bonanza. Russia’s current account surplus doubled toGlobal inflation shot up.
Meanwhile, emerging economies led by China got a big discount on the oil they bought from Russia. It is hardly in Western interests for the People’s Republic, its biggest geopolitical and economic rival, to benefit from cheaper energy.This has not stopped some from arguing that the Western allies should double down on sanctions against Russian hydrocarbons.
The KSE report argues that times have changed. Whereas Europe was vulnerable to a sudden loss of Russian energy imports last year, now Putin has his back to the wall. Europe has done a remarkable job building up alternative energy sources, so it no longer depends on Russian gas. Prices have fallen back to pre-war levels.
Meanwhile, global oil prices have fallen sharply from their peak, while the Kremlin has to offer a discount of about
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