President Joe Biden has announced a US ban on buying oil from Russia as Western leaders try to toughen sanctions on Vladimir Putin’s rogue state.
As fighting in Ukraine intensifies two weeks after the Russian invasion, NATO countries are refusing to launch the assault for fear of provoking Moscow’s anger against them.
Instead, the United States, United Kingdom, European Union and other allies have cut off the Russian economy from the West and intend to wage a war of attrition to put the country bankrupt.
The supply of oil and gas is at the heart of the sanctions.
Russia relies on selling energy to the world with diverted profits to pay for the military, but the economy is too dependent on this sector.
Russia is the world’s third largest oil producer, behind the United States and Saudi Arabia.
However, this ranking may change as other countries turn on and off their oil and gas production.
About half of the 10.7 million barrels of oil that Russia extracts every day from the ground is destined for Europe. However, Russian oil represents only 8% of UK supply and 3% of US needs.
The world’s major oil producers ranked by millions of barrels produced each day.
It is easier to move bulk oil than gas. Most oil is transported around the world in tankers, while gas is more volatile, harder to handle and is supplied to Europe by pipeline from Russia.
Biden and European leaders are urging Saudi Arabia and other Gulf states to hedge Russian procurement. Yet the Saudis seem to be holding back on waiting for the price escalation to rise even further.
Saudi Arabia and many other oil-producing countries belong to OPEC – the Organization of the Petroleum Exporting Countries – but the United States and Russia are not members. OPEC provides around 60% of the world’s oil supply.
Although not a member, Russia has worked for several years with OPEC to fix oil prices. The tool they use is to switch supplies on and off to keep the price as high as possible.
Several European countries rely on Russian gas to supply power plants and industry.
The European Union imports about 40% of the bloc’s total gas needs from Russia, with much of the supply going to Germany and Italy. The UK imports little gas from Russia – around 5%.
NATO countries Turkey, the Netherlands, Hungary and Poland are also at risk if Russia cuts off supplies.
Politicians are exploring increased production with other suppliers, such as Nigeria, Qatar and Algeria.
The chart shows countries dependent on Russian gas supply ranked by billion cubic meters imported each year.
Businesses and consumers are already feeling the impact of sanctions against Russia.
Since January, energy costs in Europe have jumped 142%. Most of the rise has come in recent weeks as the threat of invasion intensified and became a reality for Ukraine.
In the United States, which is less dependent on oil and gas imports, the price increase is 37%.
The world can replace Russian oil and gas as other countries step in and produce more fuel for the West.
The EU proposes to wean businesses and consumers off oil and gas by 2030 by diversifying suppliers and finding new ways to power electricity generation.
Britain and the United States have similar plans.
It is unclear how sanctions will prove to be an effective tool in curbing Russian aggression.
In the short term, the sanctions are unlikely to harm the Russian economy enough to force a change in tactics and a withdrawal from Ukraine.
For example, the United States’ ban on Russian oil and gas does little financial damage to either nation.
The United States imports little Russian oil and no gas. Russia can sell excess oil elsewhere – customers could include China and India.
Before sanctions affect Russia, the world order must change. First, countries must agree on an action plan and stick to it. The loopholes in the embargo must be tightened and more countries must agree to blacklist Russia for affecting the economy.
As companies and countries put money above human rights, sanctions will look good on leaders bragging about what they are doing to help Ukraine, but not getting much- thing.
A sanction is a penalty inflicted by one or more countries on another country that does not respect international law.
The sanctions are designed to demand a financial penalty as an alternative to a military confrontation.
Russia risks becoming a pariah state as more countries sever ties with Putin’s government.
Along with oil and gas embargoes, an ever-increasing number of Western brands are pulling out of the country. These companies include the oil company Shell, McDonald’s, Apple, Microsoft and Ikea.
The Kremlin says it was ready for sanctions and won’t do much to hurt the Russian economy.
Putin has criticized the United States for declaring an economic war, but still strangely calls its invasion of Ukraine a “special military operation”.
The Russian stock exchange closed two weeks ago and the central bank doubled interest rates to almost 20% to counter inflation.
Banks cannot access foreign currency accounts and the ruble is almost worthless. As more Western brands withdraw inventory and close stores, prices are rising in supermarkets. Western companies also deactivate their Russian websites.
The list goes on, including the United States, all members of the European Union, Switzerland, the United Kingdom, Canada, Japan, and South Korea.
Notable exceptions are China, India, Brazil, Israel, Mexico and South Africa.
Venezuela, Cuba, North Korea and Syria are siding with Russia.
Venezuela is an interesting case. The country is a major oil producer under US sanctions but could provide the United States with an alternative to currently embargoed oil imported from Russia. Maybe the Latin American pariah can find a way back due to the Russian-Ukrainian war.
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