Europe’s Russia Sanctions Are a Shot to the Foot
While Russia has suffered as a result of Western sanctions, nearly one-fifth of Ukrainian territory remains under Russian occupation. If the European Union is enduring severe economic pain while Russia’s aggression proceeds apace, sanctions become tantamount to self-flagellation.
BERLIN – It seems obvious that sanctions – an increasingly important tool of Western foreign policy – should inflict significant pain on the target without exacting unsustainably high costs from the country imposing them. But the European Union’s sanctions on Russia – intended to punish the country for its brutal war of aggression against Ukraine – do not meet this condition.
At the center of the EU’s plan to punish Russia is an effort to eliminate its dependence on the cheap Russian energy that long powered its growth, including by increasing its reliance on liquefied natural gas imported from the United States and elsewhere. But LNG has long been an overpriced (and carbon-intensive) alternative to piped gas: before Russia invaded Ukraine, it was 4-5 times more expensive than natural gas. Now, it is even more exorbitantly priced: since the war began, the cost of LNG has more than doubled.
But with the Kremlin slashing gas flows to Europe, in order to ensure that it – not the EU – dictates the timetable for phasing out Russian supplies, European countries have had little choice but to rely increasingly on LNG imports. This is creating serious challenges for Europe’s manufacturing base, to the point that some European firms are now considering shifting production to the US, which offers not only cheaper fuel, but also massive subsidies and tax credits under its new Inflation Reduction Act (IRA).