[Russia’s economy ministry, as reported by Reuters citing
government documents, says that expected Russian energy export
revenues will reach $338bn in 2022 which is nearly $100bn or a third
more than the $244bn figure for last year. This is in large part
because Russia was able to reroute two-thirds of its lost sales to the
West to countries such as India and China through which it entered the
world oil market.]
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HOW THE WEST’S SANCTIONS ON RUSSIA BOOMERANGED  
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Patrick Cockburn
October 10, 2022
Counterpunch
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_ Russia’s economy ministry, as reported by Reuters citing
government documents, says that expected Russian energy export
revenues will reach $338bn in 2022 which is nearly $100bn or a third
more than the $244bn figure for last year. This is in large part
because Russia was able to reroute two-thirds of its lost sales to the
West to countries such as India and China through which it entered the
world oil market. _

Photograph Source: Jernej Furman – CC BY 2.0,

 

When President Vladimir Putin invaded Ukraine in February, he began
two very different wars. One was a military conflict in which the
Russian armed forces have suffered repeated defeats, from the failure
of the initial invasion to the successes of the Ukrainian
counter-offensive.

But the Ukrainian conflict
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saw the start of an economic war waged against Russia by the West
whose outcome is far more uncertain. The US, UK, EU and their allies
have sought to impose a tight economic siege on Russia, focusing
primarily on its oil and gas exports, to weaken it and compel it to
give up its assault on Ukraine.

This second war, in contrast to the situation on the battlefield, has
not been going well and the West suffered a serious setback this week
when the Opec+ group, which includes Russia, decided to cut its crude
exports
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two million barrels a day in order to force up prices. The decision
came despite intense lobbying of Saudi Arabia by the US where
President Joe Biden is desperate to prevent the price Americans pay
for petrol at the pump going up just before the midterm congressional
elections in November. Reacting furiously to the news, the White House
spokesperson Karine Jean-Pierre said that it was “clear” that
Opec+ was “aligning with Russia”.

EMBARRASSING ASPECT OF OIL SANCTIONS

The desire among Democrats to keep oil prices low is so intense that
they have led to a little-noticed and – from the point of view of
the US and many of its Nato allies – embarrassing aspect of oil
sanctions on Russia. It is only because the sanctions have largely
failed that the price of benchmark Brent crude fell 24 per cent from
$123 a barrel in mid-June to $93.50 a barrel earlier this week.

This fall in prices, which is now going into reverse so the price may
reach $100 by Christmas, happened in large part because Russia was
able to reroute two-thirds of its lost sales to the West to countries
such as India and China through which it entered the world oil market.
This has been hugely convenient to the US because the slide in the oil
price has prevented the rise in the cost of living being even higher
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The link between falling oil prices over the summer and the successful
Russian evasion of sanctions on its oil exports should be obvious, but
apparently eluded Liz Truss when she met President Joe Biden in New
York on the margins of a UN General Assembly meeting last month.

An account of the meeting by my brother Andrew Cockburn
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the Washington editor of _Harper’s _magazine, reveals that Truss
asked Biden for two things: a strong effort to bring down world energy
prices and a total embargo on Russian oil exports. Biden was surprised
that Truss did not understand that her requests contradicted each
other, since taking Russian crude off the market would inevitably
raise the price of oil. After the meeting, Biden told his aides that
he found the new British prime minister to be “really dumb”, and
not to be taken seriously.

ELECTRICITY BLACKOUTS

Truss is not alone among European leaders in demanding that Russia be
treated as an economic pariah, but without taking on board the degree
to which the policy has already boomeranged. It may have hurt Russian
consumers, but primarily the professional classes in the big cities
which bought Western-made goods and took foreign holidays. But the
purpose of sanctions is to deny the Russian state the revenues needed
to fight the war in Ukraine and in this it has completely failed.

Russia’s economy ministry, as reported by Reuters citing government
documents, says that expected Russian energy export revenues will
reach $338bn in 2022 which is nearly $100bn or a third more than the
$244bn figure for last year. The rise in export earnings will be even
higher after the Opec+ production cut. The ministry had expected the
Russian economy to contract by as much as 12 per cent, but has revised
this down to 4.5 per cent. The Russian military debacle in Ukraine has
many causes, but lack of money is not one of them.

If the damage inflicted by sanctions on the regime in Moscow is less
than expected, the self-harm to the rest of Europe and to a lesser
degree the US, has been far greater. Every country faces a cost of
living crisis. Manufacturing industry is buckling, particularly
sectors producing metals, fertiliser, paper, glass and anything
requiring a high input of gas and electricity. The National Grid in
Britain warned this week of the risk of electricity blackouts.

Economic and social disruption is justified publicly by Western
governments claiming that this is the necessary price of resistance to
Putin in Ukraine. By-and-large, the public has accepted this argument,
though sanctions have little to do with Russian failures and Ukrainian
successes. Liz Truss and her ministers keep saying that the worldwide
cost of living crisis is the result of “Putin’s illegal war in
Ukraine”. But it would be truer to say that the economic turmoil is
the result of an ill-considered decision to wage economic warfare
against Russia which was never likely to work.

GREATEST MISCALCULATION IN EUROPEAN HISTORY

Because of governmental and popular outrage against Putin and Russia,
the policy of sanctions has been surprisingly little debated, despite
its tremendous impact on the lives of hundreds of millions of people.
Critics of sanctions are dismissed as weak-willed in opposing Putin,
if not his secret proxies.

The Hungarian prime minister Viktor Orbán said this summer that
“initially, I thought we [the Europeans] had only shot ourselves in
the foot, but now it is clear that the European economy has shot
itself in the lungs, and it is gasping for air”. But Orbán is
widely denounced as a right-wing populist nationalist
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to Putin, whose views can be safely ignored.

Yet an embargo on Russia was always a dubious policy. Sanctions on
much smaller countries like Iran, Iraq and Syria have failed to change
regimes or behaviour. They had never been tried against a country with
a surplus of oil and gas and capable of feeding itself, like Russia.
Governments and public opinion prefer economic sanctions to shooting
wars as more humane and less risky than an outright military conflict,
but they seldom grasp that embargoes usually fail to achieve their
objectives.

When this happens, the official explanation is always that the
sanctions are not tight enough. This is happening now with Russia. One
idea is to deny insurance to tankers carrying Russian crude but this
would raise oil prices. Another US-backed plan is for a price cap to
be put on Russian oil so it would continue to flow, but at a much
reduced profit to the Kremlin. A drawback in this piece of wishful
thinking is that it would require Russian co-operation – and the
Russians say they will cease to supply anybody trying to implement
such a scheme.

Putin made one of the greatest miscalculations in European history
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invading Ukraine, but Western leaders were almost equally unwise to
opt for economic warfare as one way of stopping him.

_Patrick Cockburn is the author of War in the Age of Trump
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* Ukraine invasion
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* Economic Impact of the Ukraine War; Sanctions on Russia; US
Inflation;
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