Hydrocarbon hypocrisy sanctions are crude and often don’t work russia’s continuing energy exports prove it

Hydrocarbon hypocrisy sanctions are crude and often don’t work russia’s continuing energy exports prove it

Three months into Western sanctions against Russia following its invasion of Ukraine, two outcomes are apparent. Initial expectations of the US and EU were over the top. In addition, it’s getting harder for the EU to keep its own flock together in its aim to cripple Russia’s energy sector. For example, EU leaders this week agreed after protracted negotiations to stop imports of Russian crude by the end of 2022. However, they were forced to grant Hungary an exemption from it. Even Bulgaria’s timeline is likely to be extended. And as for Russian gas, there’s no deadline at all.

A step back will make it clear why Western sanctions and the subsequent sermonising aimed at countries such as India were unwise. Let’s start with Iran, a country subject to US sanctions soon after the Islamic Revolution in 1979. Into its fifth decade, the conversation is still about changing Iran’s “behaviour”. For sure, when the world’s largest economy imposes sanctions, it limits the economic potential of the victim. But evidence shows that it doesn’t achieve its core aim. Also, the collateral damage on unrelated countries cannot be justified by convenient references to a rules-based order.

Another reason why sanctions don’t really work is that both sovereign nations and private firms have a powerful economic incentive to bypass them. US media reports on Iran’s “clandestine finance system” straddling the globe is an example. In the current context, IEA data showed that even in March, Russia remained the OPEC+ grouping’s second-largest crude oil supplier with 9.10 million barrels a day. A look at the predicament of Germany, EU’s economic powerhouse, provides an insight on this issue. Russia is the source for about 55% of Germany’s natural gas, which is harder to substitute than oil. A scenario analysis by the German Bundesbank on the outcome of an immediate halt of Russian energy imports estimated the economy would shrink by 2%. Moreover, Germany’s current inflation level of over 7% is a four-decade record.

There’s no case to support Russian actions in Ukraine. However, Western response smacks of both double standards and unsophistication. The proof for it are the exemptions within its ranks and growing cases of sanctions bypass. India was right to say, more than once, that Western lectures on buying Russian oil don’t square with Western purchase of Russian gas.