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**MARCH 2, 2022**
Kuttner on TAP
The Economics of Mutually Assured Energy Destruction
****
Will the West go all the way and block Russian oil exports?
Naysayers have been pointing out that there is one huge loophole in the
West's economic and monetary blockade of Putin's Russia-oil. As
long as Russia can keep selling oil on world markets, Putin can earn
plenty of dollars and euros.
The more the price of oil rises, the more Putin has the West over a
barrel. Despite all the other measures to keep Russia from accessing
dollars, Russia's trade surplus has been projected at $20 billion a
month-almost entirely based on oil exports.
A Treasury official knowledgeable about financial sanctions confirmed to
me that Russian oil sales to U.S. and other customers are permitted
through what are known as general licenses. The dollar purchase would
need to be booked in a third country.
But in the last two days, this loophole has all but closed-not via
government policy but because private purchasers are leery of Putin and
not sure what Western governments will do next. Despite the exemption,
refiners have all but ceased buying Russian oil
,
and banks are refusing to finance shipments. The private sector, in a
rare show of patriotism, is treating Putin as a pariah.
So Biden and his European allies may have a much tougher sanctions
policy than they intended, in spite of themselves. This will hurt both
Putin and the West. Russia will be even more short of dollar reserves,
and the West will be paying more for its oil.
Thus, the mutually assured destruction of dependence on carbon fuels.
The time to have gotten off this track, as a matter of both climate
policy and foreign policy, was at least two decades ago. If only.
And if only the election of 2000 had not been stolen from the one top
official who grasped the stakes earlier than most-Al Gore.
Now, we are having to make this green transition to renewable fuels
under battlefield conditions. There is nothing like oil at $110 a barrel
to concentrate the mind.
****
~ ROBERT KUTTNER
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**Robert Kuttner's latest book is**
The Stakes: 2020 and the Survival of American Democracy
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