The magnitude and violence of the Russian invasion of Ukraine have led the European Union to approve in just two weeks the batteries of commercial and political sanctions that it had prepared to respond to an attack that was expected to be much more limited and progressive. Community sources acknowledge that the next punishment, the fifth since the conflict began, will practically exhaust the sanctioning room for maneuver and will force even the energy break with Moscow to be considered, an option that had been reserved as a weapon of last resort. The debate on the cut of Russian energy imports will reach its boiling point this Friday, during a meeting of the permanent representatives of the Twenty-seven in Brussels. Germany and several partners are resisting such punishment for fear of damage to their own economies. But community sources indicate that the prolongation of the war and the continuous increase in the number of civilian victims redouble the pressure on Berlin to accept the economic sacrifice of giving up the purchase of Russian gas, oil and coal.
The debate on the Russian supply cut began, according to diplomatic sources, last Monday at the meeting of the permanent representatives of the 27 partners in Brussels. The division on a measure unthinkable before Russia’s attack on Ukraine even complicated the processing of the fourth package of sanctions. But the differences were parked and the new sanctions were finally approved on Tuesday.
The discussion on this energy embargo, according to community sources, will resume this Friday with a new meeting of the 27 representatives of the European capitals. Although a decision is not yet expected, community sources indicate that it will be a first litmus test “to test the will to break sharply” with dependence on Russia. And they point out that the evolution on the battlefield “can precipitate a punishment” that seemed unthinkable before Putin started the war on February 24.
The presence of US President Joe Biden at next week’s European summit seems set to increase the pressure on EU partners reluctant to cut energy ties with the Kremlin. The sources consulted indicate that if Biden presses in favor of the energy embargo in Europe, the EU could demand more favorable treatment from him in the conditions of sale of US liquefied natural gas destined for the community markets.
Washington, explain diplomatic sources, has been a key player in the tightening of European sanctions, especially in the first round, when Brussels still trusted in a much less deadly Russian aggression. The calculation was skewed from the first day of bombing. And the continuation of the war and its escalation at times make maintaining energy relations with the Kremlin increasingly unsustainable.
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All the sources consulted, even those who are not in favor of the energy break with Moscow, insist that no option can be ruled out, not even that of stopping importing gas, oil and coal. The same sources point to countries such as Hungary, Italy and, above all, Germany, as the most reluctant to include energy in the sanctions package.
But countries with greater energy dependence than Germany, such as Poland or the Baltics, are already backing an embargo on Russian oil and gas, even knowing the serious economic and social impact it will have on them. This willingness to sacrifice calls into question the reluctance of Germany, a country that, according to recent calculations, would suffer a high but manageable economic cost. The drop in German GDP could reach 3%, according to a study this month by the universities of Bonn and Cologne, in which it is recalled that the shock of the pandemic reached 4.5%.
Instead, the suspension of energy purchases would almost be the coup de grâce for Vladimir Putin’s regime, which would lose its main source of financing to maintain attacks against Ukraine. Brussels estimates that Moscow earns some 700 million euros a day from its energy exports. Since the beginning of the war, 23 days ago, the Russian president would have amassed, according to these calculations, reserves of more than 16,000 million euros.
Some countries want to act immediately. And they see it as a mistake to wait until Putin commits an even more brutal act of war (such as a nuclear incident) that triggers the most extreme retaliation. “If you want to do something significant, this is the time to deal a critical blow to the regime and accelerate its economic collapse, not prolong it,” says a senior diplomatic source who is critical even with previous sanctions packages, which foresee long implementation periods, of two or three months, so that the Twenty-Seven can adjust. “Will Ukraine still exist in two or three months?” asks this source. “We have the privilege of time, but the Ukrainians do not.”
On the other side, on the other hand, a European source points out that the debate must be approached with great caution. “Are we really interested in causing a total collapse of the Russian Federation, with what that would mean destabilizing the entire area?” The same source recalls that the sanctions have so far had the unanimity of the 27 countries and the support of all their public opinions. And he warns that targeting Russian hydrocarbons could endanger that unity and cause rejection among certain populations.
But Russia’s energy bounty is growing day by day as Putin launches missiles at homes, hospitals, theaters and key infrastructure in Ukraine’s major cities. And to top it off, the greater the aggression against Ukraine, the more Russia enters because the prices of oil, gas and coal skyrocket. The price of gas has become 170% higher during the conflict than at the beginning of the year, according to data from the OECD.
“In the medium term, Russia’s revenues will be the first victim, since energy exports account for at least a third of public revenues. But the EU will also be damaged in the short term with a very likely supply shortage,” says Cyrille Bret, a researcher at the Jacques Delors Institute and a professor at the French university Science Po. And in this last part, that of self-harm to a different degree, is where all the sources consulted for this information agree.
The European Commission is already analyzing the consequences of totally or partially renouncing the Russian supply. And its still-secret conclusions point to a major blow to some EU partners, with possible reverberations for all, say sources familiar with the reports. Those same voices indicate that contingency plans are also being studied to compensate for the blow.
Community sources indicate that the European Council, which is holding its summit next Thursday and Friday in Brussels, is also considering invoking Article 122 of the EU Treaty, which contemplates the possibility of launching emergency measures “if serious difficulties arise in the supply of certain products, especially in the field of energy”.
Data from the Bruegel Institute, the largest study center in the European capital, indicate that Germany’s energy dependence on Russia reaches 27% and that of Italy, 31%. In countries such as Latvia or Poland, the dependence on gas is almost total, but of the total generation, this source only reaches 8% and 13%, respectively, so they have greater room for manoeuvre.
Between supporters and opponents of cutting there is a third group of countries, according to diplomatic sources, which includes, among others, France, Spain and the Netherlands. But the position of this middle band could opt for one side or the other depending on the other energy debate that is raising spirits in the EU: that of containing the electricity bill of homes and businesses and preventing gas from marking an escalation of tariffs as a result of the European price formation system.
The German chancellor, Olaf Scholz, is the leader to convince in both cases, because he refuses to include energy in the sanctions and admit a change in the price formation system to exclude gas, as requested by the Government of Pedro Sanchez among others. The pressure for Berlin to change its position continues to increase in one debate after another.
Almost a hundred MEPs, practically from the entire parliamentary arc (popular, socialists, liberals, greens, left, ultra-conservatives and even eurosceptics) have signed a letter calling for a total energy embargo on Russia. The text recalls that in 2020, with energy prices sunk by the pandemic, Russia entered 62,000 million euros from its energy exports to the EU. And that with current prices, Putin can finance the purchase of 400 T-72 model tanks with the proceeds from the sale of gas and oil in a single day, when the Ukrainian forces had managed to destroy 285 tanks up to March 6.
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