Are the Sanctions the United States’ New Best Friend or Worst Enemy?

April 22, 2022 Updated: April 22, 2022

Commentary

Ongoing global sanctions will shape and determine the post-Putin era. Economic warfare can easily backfire and turn once pro-American energy dependent countries into pariahs and push Russia toward the United States’ adversaries. The sanctions-triggered geopolitical changes all point in one direction: China.

In the past decades, choking sanctions have repeatedly failed and spawned consequential change in only about 40 percent of cases. The shortcomings were generally the so-called carve-outs, the exemptions. Each individual nation could adjust and exempt rules for their own economic needs. The recently marshalled economic sanction arsenal is a standalone in modern history, but it also triggered unparalleled change in global political dynamics. Energy dependency made nations more vulnerable and willing to find old-new alliances to secure and protect their economies. The carve-outs could be the United States’ new best friend or worst enemy.

Sanctions imposed on Russia caused tight markets and high prices. Less energy needed to be sold to generate more income for Moscow to finance its war. It has meant $3.4 billion additional revenue for Moscow since the invasion started.

Russia is by far Europe’s biggest energy supplier, and the dependency is far too large to replace in a short time frame. The continent should curb its 40 percent Russian gas, 45 percent coal and 25 percent oil imports. Regardless of the more than a decade-long talks about decreasing the EU’s Russian energy dependency and previous disruptions, the eastern pipeline deliveries have increased after the annexation of Crimea in 2014. The EU also began importing Russian LNG from the Yamal LNG project in 2017. Substitution of Europe’s pipeline gas requirements with LNG would amount to 53 percent of the global LNG trade in addition to existing needs. Supplementing with renewables has also proven difficult, given the known supply-chain issues and their lengthy rollout time.

Hungary sees no “red lines” on the sanctions, except on energy policy. The Orbán government has always advocated its national interest as its top priority. It “will not allow Hungarian families to be made to pay the price of the war; and so, the sanctions must not be extended to the areas of oil and gas,” explained Prime Minister Viktor Orbán. Simply put, there’s no other option.

Hungary isn’t the only country withstanding the energy sanctions. Slovak Economy Minister Richard Sulik said Slovakia would cooperate with Europe, but the country cannot afford to be cut off from Russian gas flows, and if it had to pay in roubles, it would. Austria’s finance minister, Magnus Brunner, rejected sanctions targeting Russian oil and gas, adding, “If the sanctions hit yourself more than the other one, I don’t think that’s the right way to go.” Germany has so far refused to impose embargoes on energy imports saying it would diminish economic growth, send gas prices and unemployment to record highs, and trigger a global inflationary shockwave. In the past weeks, India has also bought 13 million barrels of crude oil from Russia at a deep discount, as nearly 85 percent of its crude oil requirement comes from imports.

Washington should know better; decoupling doesn’t happen overnight. The United States doesn’t have the moral high ground to shame and blame nations while still shopping from China. Meanwhile, Beijing has doubled its LNG imports from Russia compared to last year and reaffirmed its “no limits” cooperation. In March, overall trade rose over 12 percent from a year earlier. China had also lifted import restrictions on wheat and barley from Russia on the day the of the assault.

Nations heavily affected by the sanctions are more likely to step on the unpaved road of necessary reassessment but with rationing-style measures aligned with their national interests regardless of the international pressure, merely because no government wants to starve and freeze its citizens. Shopping with a strong moral compass would screech the local and global economy to a grinding halt in no time. The United States would not be immune to the asymmetric shockwave either but could indisputably be one of the winners, being nearly food and energy self-sufficient, while Ukraine is fighting a proxy war for democracy and the EU is bearing most of the economic consequences.

Besides imposing sanctions, the United States should also focus on reversing any counterproductive outcomes that clearly advance China’s interests. The condemned Russia has no other option than to communicate through one of its allies. Beijing, of course, has already announced its willingness to facilitate peace talks. The economic outlook in South Asia and in the Sahel region seems bleak. Putin’s war has already pushed Sri Lanka closer to default. These regions’ ties to Beijing’s Belt and Road Initiative is already substantial (pdf). Food shortages and steeply rising prices could chain them even more to the emerging new hegemon.

The pinnacle of effective sanctioning is to calculate the counterproductive effects. Washington should tackle the deterioration in global food and energy security, and help the EU to manage its third asymmetric shock in 15 years, instead of chastising nations for not aligning fully with its demands. The cheered wealth freezing and seizing should be used as leverage to negotiate to crush Putin’s system internally rather than as virtue signaling. It makes sense why Ukrainian President Volodymyr Zelenskyy asked President Joe Biden to delay sanctioning Russian oligarch Roman Abramovich. It would also be naïve to think that Russian oligarchs’ remaining wealth will not find an accommodating country or region. Such as China. Or the Middle East. Rational economics always win.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Monika Palotai is a Hungarian visiting research fellow at the Hudson Institute in Washington, D.C., specializing in international and EU law.