Two Years In: Are Russian Oil and Gas Sanctions Working?

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Two years after the Russian invasion of Ukraine, the oil and gas sanctions have failed to temper Russia’s vendetta. Despite being the most sanctioned nation in the world with over 16,000 sanctions in place, Russia continues to press toward its conquest goal in Ukraine. In other words, the heavy sanctions against Russia have failed to stop Putin. 

From the onset, many officials predicted the ineffectiveness of sanctions against Russia. Despite the presidential claims to the contrary, the sanctions have proven to fall woefully short of preventing aggressive advancement in Ukraine. Today, the Russian economy booms and the fighting in Ukraine remains as deadly as ever. 

Biden Announces Tougher Lockdown on Russian Exports

So, how does the President respond to the lackluster results from the original sanctions? By imposing more sanctions, of course. In late February, the Biden Administration unveiled the largest-ever round of sanctions against Moscow, elevating attempts to impose restrictions on the Russian economy, oil and gas exports, and supply access. 

As the Kremlin enters its third year in conflict with Ukraine, this new wave of sanctions presents a harsh imposition against Russian advancement. At the same time, the new, more severe sanctions seem to act as a punishment for the death of opposition leader Alexei Navalny. 

“Our actions to ensure Mr. Putin pays an even steeper price for his aggression abroad and repression at home are actually having an impact,” said John Kirby, White House national security spokesperson.

As the past two years of sanctions have proven, the new impositions may be ineffective at squelching the Russian fire. As Russia continues to subvert sanctions through leveraging loopholes, phantom supply lines, and underhanded tactics, it’s unlikely further sanctions will have the impact that President Biden desires. 

The Limited Impact of Original Sanctions

Following the original invasion in 2022, western nations imposed extensive sanctions against trade regarding oil and gas, particularly. The intent was to devastate the Russian economy, forcing citizens to question the viability of continuing in war and eventually stop Russian forces from advancing further. However, under Putin’s leadership, the Kremlin subverted the sanctions, leading to a less-than-stellar result. While somewhat impacted, the Russian economy did not experience nearly the devastation the West hoped for. 

Despite the original 2022 sanctions being far beyond the historical norm, the Russian banks and the economy took them in stride. With surprising speed, the Russian economy bounced back, leaving little time for citizens to feel the impact of the 2022 sanctions. 

A few sanctions included a $60 price cap on Russian barrels of oil, which is far below the typical price range. These sanctions were intended to prevent nations like the EU, the United States, and Japan from purchasing Russian oil at a premium. However, there is reasonable doubt these sanctions were ever effective. 

How Russia Evaded Oil and Gas Sanctions

Instead of severely hindering the Russian economy, the sanctions pushed Moscow to turn to other, more dangerous allies. Putin quickly set his eyes on India and China to help him subvert the Western sanctions. Naturally, the two Asian nations were found to be willing economic allies in purchasing Russian gas and oil despite heavy sanctions. China, India, and Russia became fast friends, supplementing the Russian economy and almost entirely negating the Western attempts to harm Russian supplies. 

As for tech supply, Russia had all it needed from its new best mate, China. China was more than willing to provide Russian forces with the technology, weaponry, and supplies it needed to limit the effectiveness of Western sanctions. Russians quickly turned to China for cars, electronics, and weapons components, blunting the sting of the West. China remains largely responsible for meeting Russian supply demands when other nations limit or cease exporting goods to Russia. 

India jumped at the chance to purchase Russian oil when no one else would. In fact, India became the largest purchaser of Russian oil in the world, exceeding the combined purchases of the United Arab Emirates, the United States, Saudi Arabia, and Iraq. In May of 2022, estimates suggest that India took 1.9 million barrels of Russian oil per day, capitalizing on the lower prices while subverting Western sanctions. 

Some critics say the United States bears some responsibility for the ineffectiveness of sanctions against Russia. Unlike other incidents in the past when the U.S. imposed a total embargo on oil prices, the United States and Western nations chose only to place a price cap on the purchase of Russian oil barrels. 

Russia employed a network of suppliers, transporters, and shippers based in nations like China, India, and the United Arab Emirates to sustain supply lines and economic development. This shadow fleet enabled Russia to not only survive the West’s sanctions but to thrive underneath them. These shipping companies, insurers, and traders do not answer to Western rules, giving free rein to Moscow to meet the nation’s demands with ease. 

Today, Russians still receive televisions, computer chips, technology, and material components from its network of shady suppliers. The Western sanctions have not effectively hindered Russians from receiving the required supply. The White House apparently came to this same conclusion when they rolled out a series of new restrictions designed to stomp out Russian loopholes and sanction subversion.

The Proposed New Restrictions on More than Russian Oil and Gas

In late February, President Biden announced more than 500 new sanctions on Russia, piling on the restrictions for the Asian nation. The announcement came just one week after the death of Alexei Navalny, leader of the opposition to Putin. 

“The American people and people around the world understand that the stakes of this fight extend far beyond Ukraine,” Biden said in a statement announcing the sanctions. “If Putin does not pay the price for his death and destruction, he will keep going. And the costs to the United States — along with our NATO Allies and partners in Europe and around the world — will rise.”

While many of the new sanctions were already in process, several new additions were made due to the death of Alexei Navalny in a Siberian prison. The additions target those responsible and involved with Navalny’s death. The President stated that Putin is unequivocally accountable for Navalny’s death and is “more proof of Putin’s brutality.”

The most recent wave of sanctions is designed to make it more difficult for Russia to circumnavigate the impositions. The new presidential sanctions imposed restrictions targeting Russia’s financial sector, defense industrial base, prominent networks, and sanctions evaders, according to the White House press release

This clamp-down entails three broad aims, including: 

  • Reduce Russia’s revenue
  • Cut off supplies 
  • Address sanctions loopholes

A primary focus of the new sanctions is to impose further export restrictions on nearly 100 entities for providing “backdoor support” for Russia’s war machine. Biden claims this bill would severely limit Russian energy revenue, prevent suppliers and traders, and tighten the grip on nations allied with Moscow. 

President Biden noted that his new proposal would include a significant amount of relief funds to be sent to Ukraine, helping them purchase ammunition, provisions, and weapons components. Naturally, this bill passed the Democratic-controlled Senate with little resistance. 

Biden Shames House Republicans

While announcing this new bill, the president wasted little time shaming the Speaker of the House for failing to put his bill to a vote with more urgency. The president urged House Republicans to act swiftly in passing his bill, claiming time is of the essence. 

In total, the Biden Administration and Congress have directed over $75 billion in assistance to Ukraine for humanitarian efforts, financial aid, and military support. While the president claims spending even more funding to Ukraine quickly is essential, Congress has yet to agree to increasing the already historic amount. 

Biden was quick to criticize House Republicans, shaming them for delaying sending more taxpayer dollars to aid Ukraine. Meanwhile, House Republicans remain hesitant to increase foreign spending as Russia and Ukraine enter the third year of costly conflict. 

Sanctions Can Only Slow, not Stop Putin

As international sanctions have done little to stall Putin’s incessant war with Ukraine, it remains to be seen whether further sanctions are the best solution. ABC reported that sanctions can only slow Putin yet fall short of stopping him entirely. The Kremlin has demonstrated over the past two years that sanctions can only go so far when other nations will not abide by them. 

Russia’s adaptation under unprecedented sanctions provides insight into Putin’s underhanded tactics for avoiding international impositions. Time will tell if this new wave of Western sanctions will prove as ineffective as the original limitations. Given Moscow’s history of subverting sanctions in the past, it is unlikely that further limitations will be effective at stopping the Russian war machine. 

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Tyler Reed

About the author: Tyler Reed began his career in the world of finance managing
a portfolio of municipal bonds at the Bank of New York Mellon. Four years later, he led the Marketing and Business Development team at a high-profile civil engineering firm. He had a focus on energy development in federal, state, and local pursuits. He picked up an Executive MBA from the University of Florida along the way. Following an entrepreneurial spirit, he founded a content writing agency. There, they service marketing agencies, PR firms, and enterprise accounts on a global scale. A sought-after television personality and featured writer in too many leading publications to list, his penchant for research delivers crisp and intelligent prose his audience continually craves.

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