Did Europe go overboard with Russian sanctions?

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Joseph P Chacko
Joseph P Chacko
Joseph P. Chacko is the publisher of Frontier India, portal publishing news and current affairs. He holds an M.B.A in International Business from the Maharishi University of Management, Iowa, USA. Twitter: @chackojoseph *views are Personal.

The European Union (E.U.) countries have been sanctioning Russia following the annexation of Crimea in 2014, the war in the Donbas and the crash of flight MH17 in 2014. They have been replicating the strategy since Russia invaded Ukraine on February 24, with heavier sanctions than before. The current sanctions have been applied to all sectors except oil and gas sales. There are inconsistencies with sanctions like sanctioning Russian President Putin, who has no assets abroad or sanctioning ships that have been already sold. 

E.U. is now finding out that the United States has not sanctioned Russia enough. Here are a few examples – Not trading Russian securities for a week on the stock exchange, not delivering Disney movies or Dell holding the sales until the picture is clear, and a host of other half-hearted measures. 

Some U.S. measures are serious, like freezing Russian assets not allowing Russians to raise money on its soil, partial SWIFT ban, and ban on dollar-denominated transactions with Russia. However, the U.S. has nothing much to lose in these sanctions as it does not have much to show in terms of trade with Russia. Just six months back, it was known that a third of Russian assets were Euro assets, 16.4% were assets in dollars, 13% in Yuan, about 22% in gold, the rest was stored in the currencies of other countries. A top European official said that Russia had long changed the composition of its financial assets, and most of the assets are Yuan-dominated or kept in Russia. Russia is known to have $643 billion worth of gold reserves, but it is not known the composition and amount of reserves within Russia.

The day before, the French were busy ejecting the Russians from the Kuru launch facility, but the Europeans were surprised to hear from NASA is going ahead with the space activities with Russian carriers. Russia has already announced that it is preparing to launch One Web satellites part-owned by India. 

A section of Belarus does not want to go with the E.U. sanctions as the country requires the E.U. and Russia to survive. Officially Belarus has joined Russia. 

Russia has countered the European flight bans with its flight bans forcing the unglamorous, but money-spinning cargo runs to reschedule, reroute and cancel flights and contribute to raising shipping prices from Europe to Asia. Passenger flights are also expected to be costly due to longer routes and rising fuel charges. Europe can only hope that the Russians don’t use destination bans too. Till then, the Chinese are positioned to benefit from the situation. 

Russian Gas squeeze

Russia is collecting its regular Gas revenue from European sales and refuses to increase the badly required supply. Gazprom is not obliged to increase the export of blue fuel to the European Union, and it already supplies additional volumes of gas, said Vladimir Chizhov, Russia’s Permanent Representative to the European Union, on Wednesday, February 9, in an interview with RIA Novosti.

“No, of course not. In addition, in fact, it supplies some additional blue fuel to Europe, although perhaps not as much as some would like,” the permanent representative said, answering a question about Gazprom’s obligations to increase supplies.

In his blog on Sunday, February 6, the head of E.U. diplomacy, Josep Borrell, wrote that the Russian Federation fulfils its contractual obligations for gas supplies to the E.U. in full. At the same time, Gazprom, in his opinion, abandoned the idea of ​​additional supplies to replenish European gas storage facilities. The result was a tense situation in the market. Borrell also added that “difficulties with gas supplies” to the E.U. are related to Russia’s “crisis in relations.”

On January 12, the head of the International Energy Agency, Fatih Birol, accused Russia of aggravating the problematic situation on the European energy market. He said that Russia could increase supplies by at least a third compared to current volumes, that is, by 3 billion cubic meters per month.

Deputy Prime Minister of the Russian Federation Alexander Novak said that Gazprom and Russia are not to blame for the European energy crisis. The Europeans themselves created problems with gas prices, Russian President Vladimir Putin also emphasised. Moscow has fulfilled all contractual obligations for deliveries.

The energy crisis in Europe began at the end of August 2021. One of its reasons was the low level of storage occupancy. The situation was also affected by increased demand for raw materials in Asia, decreased energy generation from European wind farms and low levels of stocks in storage. Because of this, the price of fuel rose sharply and reached $1.2 thousand per 1 thousand cubic meters. m. In December last year, the price was already $2,000 per 1,000 cubic meters.

Now, the Europeans have sanctioned Russia with the technologies used for upgrading the oil and gas fields. The U.S. cannot fulfil all the E.U. requirements, and the U.S. benefits from the increased shipping to E.U. at inflated prices.

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