Sanctions against the energy industry of Russia in response to reported plans to invade Ukraine will be a last resort, CNN has reported, citing White House officials.
"We're trying to do it in such a way where it is a menu of options. We will not do everything on that menu all at once," one of the sources, who remained unnamed, said. "The energy section of it is the more extreme option if it becomes necessary. I do not see that as being in the first tranche. You always want to keep things in your back pocket."
According to officials from the federal government, energy sanctions could lead to higher international oil and gas prices, which would in turn push up prices at the pump for American drivers.
Given the sensitivity of this issue, CNN goes on to report, the Biden administration would be reluctant to target Russia's energy industry.
The President's ratings have been on the decline recently, with higher gasoline prices seen as one of the main culprits. Biden made a series of efforts to lower these, first by calling on OPEC to boost production, repeatedly, and then by announcing the release of 50 million barrels of crude from the strategic petroleum reserve.
"It will be very difficult to impose severe economic harm on Russia without affecting energy markets," said Edward Fishman, senior fellow at the Atlantic Council and former White House official. "Oil and gas account for 40 percent of Russia's federal budget. The United States and Europe can take steps in advance to contain spillovers, but if they plan to impose serious economic sanctions on Russia, they cannot avoid the energy sector entirely."
Besides the energy industry of Russia as a whole, sanction ideas include targeted action against the Nord Stream 2, which has been a bother for Washington from even before the latest Ukrainian flare-up. Earlier this week, U.S. officials told Congress that the government has an understanding with Germany to halt the pipeline project in case of an invasion.
By Charles Kennedy for Oilprice.com
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Comments
After all it was the USSR which broke the back of Nazi Germany in Stalingrad thus leading to the end of World War II. Another example is how Nord Stream 2 gas pipeline was completed despite all US sanctions. So new sanctions on Russia will fare no better than the current ones.
Moreover, sanctions on Russia’s energy sector will hardly affect it but they will have a major adverse impact on the global economy including the United States. If the Biden administration is unable to reduce the price of gasoline at the pump now, could one imagine how high the price will rise if sanction targeted Russian oil and gas industry.
Furthermore, China, the biggest customer of Russian oil and gas will do everything in its ability to undermine US sanctions exactly as it has successfully done in Iran and Venezuela. Russia is not Iran or Venezuela. It is the world’s superpower of energy with nuclear teeth.
If the United States is worried about Russia invading Ukraine, then it has to stop along with the EU their dangerous games of trying to bring Ukraine to both the EU and NATO. That will be the end of Ukraine as an independent country. Neither the United States nor the EU or both combined could stop this happening.
In the aftermath of the collapse of the former Soviet Union, the late American President George H W Bush promised former Soviet President Mikhail Gorbachev that the US will never bring NATO to the borders of Russia. But the US reneged on that promise as it did with the Iran nuclear deal by bringing Poland and the Baltic States into NATO when Yeltsin was the leader of a weakened Russia and is trying now to do exactly that with Ukraine. Such an action could precipitate World War III.
However, Russia under Putin is a very far cry from Yeltsin’s Russia.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London