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Officials from the G7 group of the world’s most industrialized nations are discussing the idea of an outright ban on nearly all exports to Russia in another move aimed at hurting the Russian economy over Putin’s invasion of Ukraine, sources with knowledge of the matter told Bloomberg on Thursday.
The G7 officials are discussing the idea ahead of a summit of the leaders in Japan next month, with the goal of bringing the EU into the fold of countries banning nearly all exports to Russia, according to Bloomberg’s sources.
However, an EU implementation of such sanctions would need the approval of all 27 member states, which would create a lot of differences among EU nations and fears of retaliation from Russia.
Under the current sanctions against Russia, all exports to Russia are allowed unless sanctioned. If a near-total ban on exports is adopted, it would upend the sanctions mechanism—all exports would be banned unless exempted, according to Bloomberg.
Food, agricultural products, and medicines will almost certainly remain exempted from any bans and sanctions, one of the sources said.
The EU and G7 have already banned some exports to Russia. The EU, for example, cannot export cutting-edge technology, technology needed for oil refining, energy industry equipment, technology and services, luxury cars, watches and jewelry, and aviation and space industry goods and technology, among others.
Despite the existing export bans, Russia has managed to import indirectly some of the banned goods via third countries.
Some of the most significant bans against Russia, intended to hurt a large part of Russian revenues, are the embargoes on the import of Russian crude oil and fuels in the EU. The bloc, G7, Australia, and other allies also banned from December 5 maritime transportation services from shipping Russia’s crude oil to third countries if the oil is bought above the price cap of $60 per barrel. Seaborne imports of Russian refined oil products are also banned in the EU as of early February. The flow of Russian fuels to third countries is also regulated by price caps, similar to the cap on Russian crude, if the trade is carried out through Western insurers. The cap on Russian diesel is $100 per barrel, while the cap on lower-cost petroleum products is set at $45 a barrel.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com
That is why the Russian economy has been very successfully withstanding unprecedented Western sanctions, bans and oil price cap and emerging in far better shape than the economies of those imposing the sanctions.
The proofs are that Russian current account achieved a surplus of $228 bn in 2022 according to data from the Russian Central Bank and also a trade balance surplus of $290 bn. Moreover, Russia has access to the world’s largest economy China based on purchasing power parity (PPP) with trade between the two countries in 2022 rising to $190 bn from $11 bn in 2013.
Therefore, if the G7 impose an outright ban on all exports to Russia, it will have no impact
whatsoever since the Russian economy is self-sufficient. Moreover, Russia has no need for Western technology since it has a highly sophisticated state-of-the-art technology as evidenced by its huge Vostok project in the Arctic.
In a nutshell, banning Western exports to Russia would be a blessing in disguise for Russia.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert