The United States and the United Kingdom have imposed new sanctions on Russia’s energy sector, aiming to minimize Russia’s earnings from the energy business and thereby hinder its ability to finance the military operation in Ukraine. The sanctions target two Russian energy companies and around 200 ships, which the US has linked to Russia’s “shadow fleet”. Russia is accused of building a special fleet of tankers to circumvent the sanctions.
One measure against Russian energy deals was the EU’s cap on the Russian oil price, which prohibited insurance for tankers carrying Russian oil trading at over $60 per barrel. The sanction proved ineffective after a brief adjustment period, and the Russian shadow fleet played a role in circumventing it.
In addition to sanctions on Russian energy companies Gazprom Neft and Surgutneftegas, the outgoing Biden administration plans to further toughen sanctions on the Russian banking sector, with the exception of the energy sector. Previously, there were exceptions for the transfer of payments in the energy sector.
In November, the US imposed sanctions on the Russian Gazprombank, effectively making it impossible for Russia to receive payment for gas in the EU. Hungary and Slovakia protested, as they rely on Russian gas. Ukraine has since halted the transit of gas through its territory, and Slovakia is expected to be economically hard hit. The country has threatened to take countermeasures.
Outgoing US President Joe Biden acknowledged that the new sanctions will have an impact on the US as well, including an increase in energy prices and inflation. However, he is confident that the impact on Russia will be stronger. “It’s possible that the gas price will rise by three or four cents per gallon. But the sanctions will have a more significant effect on Russia’s ability to continue the war” Biden said.
The EU imposed comprehensive sanctions on Russia on February 25, 2022, just a day after the start of the military operation in Ukraine, with the goal of fundamentally damaging Russia’s economy. The argument then was the same as now: the sanctions would make it impossible for Russia to finance the war.
Almost three years later, Russia’s military power has not been weakened. On the contrary, the use of new intermediate-range missiles, such as the Oreschnik, has shown that Russia is capable of developing and producing new, effective weapons even under the conditions of the sanctions.
In general, it can be said that almost everything related to the military operation in rubles is handled. Neither the exchange rate of the ruble nor the access to foreign currencies plays a significant role in the financing of military measures or weapons production. Western politics consistently refuses to acknowledge this insight.
In contrast, the sanctions have had massive impacts on the German economy, which has been in recession for two years and is expected to remain in recession this year. Russia’s economy, on the other hand, grew by around four percent last year.