The West has made great progress in designing sanctions that will stop or at least hamper Russian President Vladimir Putin’s war of aggression in Ukraine. But now it must finish the job, by setting a price cap on the seaborne oil exports that are still generating revenues for the Russian war machine.
KYIV – Europe, the United States, and Ukraine’s other allies have implemented two of the three measures needed to bring the Russian economy to its knees and hamper President Vladimir Putin’s war of aggression. Strong financial sanctions are in place, and Europe has formed a buyers’ coalition to place an embargo on most oil imported from Russia later this year. But now we need the third decisive piece of the puzzle: to squeeze Putin’s revenue from seaborne crude oil, starting immediately.
The financial sanctions adopted after the invasion have been effective. Freezing the Russian central bank’s reserves eliminated much of the country’s buffer against shocks. The ruble’s stability has since rested merely on strong capital controls and the continued inflow of hard currency from the sale of oil and gas. This is a precarious arrangement that can easily be broken by further negative shocks.
By creating a buyers’ coalition, the European Union has already created the mechanism for delivering such a shock. After much debate, EU member states decided to stop buying Russian oil transported by ship, starting just over five months from now. Given that Russia is still exporting around 1.25 million barrels per day to the EU by sea, curtailing these shipments could have a major impact on Putin’s revenue stream, the ruble’s strength, and the already-fragile Russian financial system.
KYIV – Europe, the United States, and Ukraine’s other allies have implemented two of the three measures needed to bring the Russian economy to its knees and hamper President Vladimir Putin’s war of aggression. Strong financial sanctions are in place, and Europe has formed a buyers’ coalition to place an embargo on most oil imported from Russia later this year. But now we need the third decisive piece of the puzzle: to squeeze Putin’s revenue from seaborne crude oil, starting immediately.
The financial sanctions adopted after the invasion have been effective. Freezing the Russian central bank’s reserves eliminated much of the country’s buffer against shocks. The ruble’s stability has since rested merely on strong capital controls and the continued inflow of hard currency from the sale of oil and gas. This is a precarious arrangement that can easily be broken by further negative shocks.
By creating a buyers’ coalition, the European Union has already created the mechanism for delivering such a shock. After much debate, EU member states decided to stop buying Russian oil transported by ship, starting just over five months from now. Given that Russia is still exporting around 1.25 million barrels per day to the EU by sea, curtailing these shipments could have a major impact on Putin’s revenue stream, the ruble’s strength, and the already-fragile Russian financial system.