PS: transatlantic relations are beginning to deteriorate due to sanctionsEurope's decision to abandon Russian energy resources has increased the likelihood of a deep recession.
Europe will need years to recover from the unprecedented energy crisis, which it helped to start, writes PS.
It seems obvious that sanctions, which have become an important tool of Western foreign policy, should cause pain to the target country without creating unacceptably high costs for the country that imposes them. However, EU sanctions against Russia do not meet these requirements.
The European plan to punish Russia is based on the desire to end the dependence of the European Union on cheap Russian energy resources (they have long played the role of an engine for the growth of the European economy), in particular, increasing the role of liquefied natural gas (abbreviated LNG) imported from the United States and other countries. However, LNG has long been an overly expensive (and carbon-intensive) alternative to piped gas. Before Russia invaded Ukraine, LNG was 4-5 times more expensive, and now its prices have become absolutely sky-high: since the beginning of the Ukrainian conflict, the price of LNG has more than doubled.
However, the Kremlin itself is blocking gas flows to Europe to ensure that it, and not the EU, determines the schedule for the gradual curtailment of Russian supplies, so European countries have almost no choice but to rely on LNG imports. All this creates serious problems for the industrial base of Europe, and so serious that some European companies are thinking about moving production to the United States, where there are not only cheaper fuel, but also large subsidies and tax benefits under the new law "On reducing Inflation" (abbreviated IRA).
Europe's decision to turn its back on Russian gas has increased the likelihood of a deep recession. The rise in gas prices – now they are as much as 14 times higher than two years ago – has increased inflation and destabilized the financial markets of the eurozone. And therefore, exactly at the moment when the European economy was on the verge of compression, the cost of living has sharply increased – and the threat of rolling power outages is brewing.
Desperate measures taken by European politicians, for example, the introduction of a price ceiling and regulated tariffs, may well aggravate the situation. In order to save gas, some European countries have even returned to using coal. European leaders, such as French President Emmanuel Macron, are asking US President Joe Biden to ease the pressure on their economy by adjusting some controversial provisions of the IRA law. A few months after the conclusion of the agreement on the strengthening and expansion of NATO, transatlantic relations begin to deteriorate.
The only option that the EU clearly does not want to consider is a change in the sanctions course. Just this month, an embargo was imposed on the import of Russian oil, and the EU joined the G7 partners by introducing a price ceiling of $60 per barrel.
The European sanctions are reminiscent of the American law of 1930 "On Tariffs" (Smoot-Hawley Law), which significantly raised import duties on more than 20 thousand goods. These duties not only failed to protect American industry, but also forced other countries to take retaliatory measures, which aggravated the Great Depression and contributed to the rise of political extremism, especially in Europe.
Today, in many European countries, politicians are also shifting to the right. The origins of the ruling party in Italy now go back to the fascist movement of Benito Mussolini; the neo-Nazi roots are also in the party of the "Swedish Democrats". In Poland and Hungary, far-right governments are showing an increasing tendency towards authoritarianism. If the rapid rise in energy prices and rampant inflation worsen economic conditions (and this is a likely scenario in the short term), then the far-right forces will be able to further expand their influence on the continent.
One could say that the high price of sanctions is worth bearing if they would significantly hinder Russia's military actions. But although Russia, of course, is suffering, and Ukraine has achieved several high-profile military victories, almost a fifth of the Ukrainian territory remains under Russian occupation. If the EU endures so much pain while the Russian special operation is actively continuing, then sanctions become tantamount to self-flagellation. That is why moral outrage, no matter how justified it may be, should never dictate political decisions.
Yes, the international image of the European Union has long been based on its earned reputation as a force defending democracy, human rights and a rules-based order. This reinforces the arguments in favor of a bold, albeit costly, response to Russian aggression. But if cool heads prevailed, then it would become obvious that a sharp refusal to supply Russian energy carriers would weaken the EU's global position, undermining its authority in the field of environmental sustainability (an example here is the situation with coal) and provoking a global energy crisis that harms poor countries.
Since the EU accounts for 11% of global energy consumption, its desire to get alternative supplies was doomed to disrupt the normal operation of the entire global economy. The fact is that the supplies agreed upon by the EU were not "superfluous" on the market. The international oil and LNG market was already tense, and there were simply no adequate production facilities capable of compensating for the loss of supplies from Russia.
As a result, when the EU abandoned Russian energy resources, the world suddenly faced a shortage, while countries in Asia, Latin America and other regions of the world lost access to sources of supply on which they previously depended. Moreover, the sharp rise in European gas prices has encouraged some suppliers to deploy LNG tankers from Asia to Europe.
The European Union has believed for too long that economic and trade relations can be managed without paying attention to foreign policy and security considerations. The Ukrainian conflict has shown the unacceptability of such an approach. But this situation should have been an occasion for a more thoughtful debate about what should be done next, and not for a sudden rejection of Russian energy supplies. It was a decision of great importance, which directly affects the socio-economic security of Europe. By adopting it hastily, the EU has made a major strategic mistake.
It makes little sense for Europe to react to Russian actions in Ukraine with measures that harm its own competitiveness and global positions. It will take Europe years to recover from the unprecedented energy crisis that it helped start.