Because of the West's need for oil and gas
Adam Toze: Big loopholes limit the impact of Western sanctions on Russia
Columnist Adam Toze.
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It took less than 24 hours for the United States to announce a raft of sanctions against Russia in response to its invasion of Ukraine this week.
Some of these measures were unprecedented, but for Ukrainians, and for others worried about Russian President Vladimir Putin's growing aggression, the only question that seemed to matter was: Will sanctions change the calculus of the war for the Russian leader?
The answer seems to be: No. In this regard, Foreign Policy magazine interviewed its famous columnist, Adam Toze, to highlight this point. Here are excerpts from the interview:
■ There has been a lot of talk about what the Biden administration has in store for the “painful sanctions” against Russia, as described by US President Joe Biden.
What do these sanctions actually mean?
■■ The most important news in this regard is that the US Treasury will extend the sanctions to include Sberbank, which is the dominant bank in the Russian economy, which includes about 30% of all Russian deposits, and half of Russians have an account in the bank, and their salaries are paid through it, so , this is a big step.
But then Biden backed away a bit when he said: We are sensitive to the issue of the need to balance the interests of consumers in both the US and Europe, of course, with their concerns about energy prices.
For this, we have provided a condition to ensure the continuation of energy payments to Russia.
At this point, of course, we must pause to ask a question: What do you mean by this, Mr. President?
Because unless you sanction energy payments, the sanctions aren't really going to work, and what Biden seems to be referring to, is that if anyone wanted to make a payment to one of these sanctioned Russian banks for energy purposes — any kind of deal on energy, they Apparently - he can do it, as long as he is acting through a non-US intermediary.
So this appears to be an open door to evading sanctions and allowing major payments to continue.
And I think that might be the solution he came up with with the Europeans, because they desperately need Russian energy.
An immediate strike against the energy supply would damage the European economy.
■ The intent of these sanctions is to prevent Russia from conducting commercial transactions abroad, most of which are related to energy, and by adding the phrase “ban all commercial transactions except energy”, which originally includes most commercial transactions, do you not think that there is a very large gap in the middle of these sanctions ?
■■ To be honest, I'm just as confused as you are, it may be, and if it is, it needs a little more scrutiny, but at the moment, if there's an energy trader, it will transfer all of its business to Deutsche Bank, or Paribas, or any other bank to continue its business.
■ It is assumed that there will be impacts on commodity markets, specifically exports from Russia and Ukraine - wheat and oil. And that probably affects countries that are sensitive to those prices, right? Should the developing world fear rising grain and gas prices?
■ Yes definitely.
I mean, we will groan under the shock of rising gas and oil prices in the West.
But the situation for poorer countries, which rely heavily on energy imports, is much more dire.
The same applies to the other dimension of Russian and Ukrainian commodity exports, which is food. They export about 23% of the global production of wheat, or nearly a quarter of the market needs, and this is a huge amount, and 19% of the corn that is exported globally, 80% of sunflower oil comes from this region.
So there are going to be big shocks, and I think the prices of all these commodities are going to go up as we speak.
Some experts predict a doubling of wheat prices, and that would have a really big impact on very poor countries like Lebanon, but also on large, low- and middle-income countries like Bangladesh, Egypt and Ethiopia, all of which rely heavily on imported grain and flour.
• We will groan under the shock of rising gas and oil prices in the West. But the situation for poorer countries, which rely heavily on energy imports, is much more dire.
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