We are in the middle of the EU-NATO-G7 summit marathon. Yesterday evening, Council President Charles Michel was confirmed in office by the 27 EU heads of state and government. He ran unopposed and will thus remain Council President and President of the Euro Summit since 2014.
You can read about what was discussed in terms of content in our three analyses:
President Joe Biden and Commission President Ursula von der Leyen will announce a deal on energy partnership today. In the future, there will be guaranteed supply volumes from the USA, as Stephan Israel and Manuel Berkel learned in Brussels.
Also both sanctions Washington relies on cooperation with the EU. Biden announced new sanctions against Russian companies and individuals, but at the same time did not put pressure on EU countries, which remain very divided on the issue of energy embargo. Eric Bonse with the details.
Western allies continue to demand that Beijing clearly distance itself from Russia’s invasion of Ukraine, and China continues to shirk a response. Biden nevertheless expressed optimism that China will not side with Russia. But some important questions remain unanswered, write Amelie Richter and Christiane Kühl.
Done #DMA – that’s how EU Competition Commissioner Margarethe Vestager summed up the agreement on the Digital Markets Act in a tweet last night. Read about the points on which the EU has now reached an agreement in the news.
Agora Energiewende has calculated that Europe could be completely independent of Russian gas and oil imports by 2027 – if countries exhaust all available means. Read more about this in the news.
The scientists Lukasz Rachel and Moritz Schularick are certain that the sanctions imposed on Russia so far are not enough. Their proposal: a complete energy embargo, but with an announcement. The West should gradually reduce energy imports in order to protect companies – and to persuade Vladimir Putin to rethink.
The rendez-vous is scheduled to take place at 9 a.m. today at the US ambassador’s residence in Brussels. President Joe Biden and Ursula von der Leyen plan to present a deal there on supplies of liquefied natural gas to Europe, which the US hopes will help Europe replace Russian gas supplies. On the sidelines of the EU summit on Thursday, the Commission President spoke of a “new chapter” in an energy partnership with the US and an important step forward. Specifically, the US is to hold out the prospect of deliveries of up to 15 billion cubic meters of liquefied natural gas by the end of this year.
Last year, the EU purchased 22 billion cubic meters of LNG from the USA. Until now, however, the Americans had left it up to the market to decide how many ships carrying liquefied natural gas were bound for Europe. Now, the Biden administration wants to guarantee the Europeans specific delivery volumes. Biden is also likely to assure the EU that it will increase gas production in the USA and grant the industry additional production licenses. The USA also holds out the prospect of supplying the Europeans with hydrogen.
The time when the EU was open to blackmail was over, Ursula von der Leyen said. However, the new pledges from the US cover only a fraction of the gas supplies Europe has received from Russia so far. Last year, it was 155 billion cubic meters, most of which came via pipelines. After the announcement of the energy partnership this morning, Biden wanted to travel on to Poland and find out about the situation on the border with Ukraine.
At the EU summit in Brussels, the announcement from Moscow that Vladimir Putin would like to have energy deliveries paid for in rubles in the future was also a topic of discussion. Diplomats said that Putin wanted to test whether the Europeans were prepared to break or undermine their own sanctions. German Chancellor Olaf Scholz reacted calmly to the announcement. The currency in which payment is made is specified in the treaties. Putin wants to divide the alliance, tweeted Adam S. Posen, president of the Washington-based Peterson Institute for International Economics.
Russia is probably trying to drive a wedge between Germany and Italy – both of which are particularly dependent on Russian gas supplies – on the one hand, and the rest of the EU and the United States on the other. If Germany and Italy play Putin’s game and pay gas bills in rubles, the sanctions alliance will erode considerably, Posen wrote.
“By increasing demand for rubles, the exchange rate will be stabilized and the import taxation for Russia will stop. But by doing so, the EU would undermine the effects of its sanctions,” financial scientist Markus Demary of the Institut der Deutschen Wirtschaft (IW) told Europe.Table.
Alternatively, European importers could try to insist on compliance with contracts denominated in euros and dollars. “The EU could simply pay in euros. Then Russia could terminate the contracts and the EU would have to sue for the delivery volumes,” says Demary. But it is questionable whether this could be enforced in court.
The American Posen calls all considerations about the exact effects of the ruble announcement purely academic. Instead, it should be considered that the economic impact of a gas supply stop for Germany and Italy would be less than feared.
Economics Minister Robert Habeck (Greens) is not the only one to vehemently contradict this, pointing out the devastating consequences that the failure of individual goods would have on entire supply chains. It should also not be forgotten that the Federal Republic also passes on gas. “A gas embargo therefore also has effects beyond Germany’s borders,” said IW Director Michael Hüther.
On Thursday, the energy association BDEW also clearly intensified its warnings and demanded the proclamation of the early warning stage according to the emergency plan gas. “There are concrete and serious indications that we are entering a deterioration of the gas supply situation,” Chief Executive Kerstin Andreae had warned. “With Russian President Vladimir Putin’s announcement that gas supplies would have to be paid for in rubles in the future, effects on gas supplies could not be ruled out.”
The Ministry of Economics, however, rejects the proclamation of the early warning stage according to the “Emergency Plan Gas” of the Federal Government.” Currently, there is no supply bottleneck in Germany. Security of supply is guaranteed,” the ministry stressed on Thursday. “Therefore, there is currently no need for an early warning stage according to the emergency plan gas.” However, the situation is being closely monitored. With Stephan Israel
The EU and the US want to coordinate and align their sanctions against Russia even more closely than before. This was stated by EU Commission President Ursula von der Leyen and US President Joe Biden in a joint statement released on Thursday on the sidelines of the EU summit in Brussels. However, no new sanctions decisions were initially expected at the summit itself.
Already at the beginning of the two-day top-level meeting, which ends on Friday, hardly bridgeable differences among the 27 member states had become apparent. Austria’s Chancellor Karl Nehammer, for example, stated categorically that no embargo of gas or oil could be made with him. “We have already decided on massive sanctions,” he said. Now, he said, it is first necessary to see whether and how they work.
Luxembourg’s Prime Minister Xavier Bettel expressed similar views. New punitive measures would have to be taken in response to a new situation. However, the status quo in Ukraine had not changed. He was in favor of a gradual approach, he added. Belgium’s head of government Alexander De Croo also said new punitive measures were not necessary at the moment.
Germany took a middle position. At the present time, Chancellor Olaf Scholz said he was against an energy embargo. However, it was impossible to say how the war would develop and what measures would be necessary later. However, Scholz had previously threatened “additional measures” at the G7 meeting under his chairmanship. What these might be remained open in the G7 statement.
Poland, the Baltic states, and Slovenia spoke out in favor of tougher sanctions in the energy sector. Slovenian head of government Janez Jansa said an energy embargo was “on the table.” However, he did not expect a quick decision. Lithuania’s Prime Minister Gitanas Nausėda spoke of a “duty” to cut off supplies of oil and gas from Russia.
The US has already imposed an energy embargo. On Thursday morning, the US government also announced new punitive measures against more than 400 additional Russians and Russian companies. According to the White House in Washington, 48 defense companies, 328 members of the Duma, and bank managers are to be fined. Among them is the head of Russia’s Sberbank, Herman Gref, who, according to US reports, has been an adviser to Kremlin leader Vladimir Putin since the 1990s.
Biden, however, did not put pressure on the Europeans in Brussels. “My theme is unity,” he stressed. After Russia, China must now also be targeted, it was said in the environment of the US president. It is a matter of ensuring that sanctions against Russia are not undermined, he said. “China knows that its economic future is much more closely tied to the West than to Russia,” Biden stressed.
The US president scored an initial success at the G7 meeting. The heads of state and government “urgently appealed to all states not to provide Russia with military or other support for the continuation of its aggression against Ukraine.”
China was not mentioned directly in the five-page document. But Scholz confirmed at a press conference in Brussels after the G7 meeting that this part of the declaration was aimed at China. The EU plans to hold a summit with China on April 1. Until then, the pressure on Beijing is likely to increase.
The Western alliances want at all costs to prevent Beijing from moving closer to Russia or even supplying Moscow with weapons. During the marathon summit of NATO, the G7, and the European Union in Brussels on Thursday, politicians repeatedly called on China to distance itself from Russia. But so far, Beijing has responded in the expected manner. Not a word of criticism of Russia, but all the more of criticism of the United States and NATO.
US President Joe Biden nevertheless expressed confidence at the end of the long day that China would eventually turn against Russia over trade dependencies. “China understands that its economic future is much more closely tied to the West than it is to Russia,” Biden said of his conversation with China’s leader Xi Jinping after meeting with his G7 colleagues. Trust is good, but control is apparently better: Biden brought up the idea of a new body for NATO and the EU that would monitor whether and, if so, how other states circumvent sanctions against Russia. He was referring to China.
NATO Secretary-General Jens Stoltenberg was also clear after the defense alliance’s special summit: “Beijing should use its considerable influence on Russia and promote an immediate peaceful solution,” the NATO chief said. However, he did not say what steps NATO would consider in response to Chinese assistance to Russia. The summit declaration by Nato states also includes this demand. The member states had unanimously adopted the document – including Hungary, which had previously been rather reticent.
Stoltenberg had already accused China on Wednesday of supporting Russia in the Ukraine war with “blatant lies.” The US and Europe have criticized China for spreading Russian fake news about alleged US chemical weapons labs in Ukraine. “Accusing China of spreading false information about Ukraine is itself spreading disinformation,” a Chinese Foreign Ministry spokesman said in this regard on Thursday in what has become a familiar manner.
In their final statement, the G7 leaders were less direct than NATO: the group of states would keep an eye on whether the sanctions were being circumvented or undermined, they said – without naming China.
The Council of EU heads of state and government met late into the evening on Thursday. US President Biden also made an appearance there – in part to discuss a common position ahead of next week’s EU-China summit. “I think the messages to China were very clear. Please keep your distance,” Belgian Prime Minister Alexander De Croo said Thursday. The majority of EU leaders made similar statements.
Meanwhile, Beijing’s foreign office spokesman stressed that China’s position is in line with “the wishes of most countries.” “We have always believed that Ukraine should become a bridge between East and West and not be on the front lines of a game between superpowers, “but in the end, China tolerates exactly that: that Russia sees Ukraine as a buffer state to the West and as its own sphere of influence, with no say in its own role. Xi has spoken with some leaders since the war began, but not with Ukrainian President Volodymyr Selenskyj.
Meanwhile, China continues to try to avoid making a clear statement by all means: The less Ukraine becomes an issue at all at multilateral events, the better it is from Beijing’s point of view. Both Foreign Minister Wang Yi and Xi himself have been urging the Indonesian G20 presidency to remove the Ukraine conflict from the agenda of the G20 summit on the tropical island of Bali at the end of October. Indonesia has shown an open mind, it said. China is also in favor of inviting Vladimir Putin to the G20 summit table – but that has long since become unthinkable for many other states. On Thursday, US President Biden even spoke out in favor of Russia’s complete exclusion from the G20. Should this not be supported by other states, Ukraine should also be invited, Biden suggested.
However, Chinese Ambassador to the US Qin Gang hinted that cooperation with Russia could still have limits. “Cooperation between China and Russia has no prohibited areas, but there are guidelines (bottom line) for it,” Qin told the partly state-run Phoenix TV on Wednesday. These include the principles of the United Nations Charter, which is the basic norm of international law and international relations, Qin said. “That is the guideline we follow in bilateral relations between China and any other country.”
The pressure on Beijing will not ease anytime soon – it will also dominate the EU-China summit. The Ukraine war will be the focus of the virtual meeting on Friday next week, EU Council President Charles Michel wrote in the invitation letter to the other EU leaders.
The summit between Michel, EU Commission President Ursula von der Leyen, Xi Jinping, and Premier Li Keqiang is the first since June 2020. Last year, a date for a bilateral meeting was repeatedly postponed due to mutual sanctions in connection with human rights violations in Xinjiang. But the mood is not really good even now. No joint final declaration is expected for the summit – an indication that no one expects much progress. With Christiane Kühl
Russia’s brutal shelling of Ukrainian cities continues. Thousands die; millions suffer. But as for further action, the West remains paralyzed on the most important issue: sanctions on Russian energy exports. Until there is an immediate and complete boycott of Russian gas and oil by Western countries, the best course is to announce phased sanctions that will be implemented gradually over the coming weeks.
The West’s initial response to the Russian invasion followed quickly and was strong and impressively united. But it is becoming increasingly clear that it was at the same time inadequate. The effects of the initial shocks to which the Russian economy was subjected by the sanctions are fading. In recent days, the ruble’s exchange rate initially stabilized and then rose steeply. At the same time, yields on government bonds have fallen again. The consensus forecast for Russian GDP growth in 2022 is minus eight percent – a steep decline, but by no means a collapse.
It is not difficult to understand why the Russian economy and President Vladimir Putin’s regime have managed to withstand the sanctions so far. Energy exports – a crucial source of revenue for the Russian state – remain exempt from the sanctions list. In fact, steeply rising energy prices have actually provided the Kremlin with massive additional revenues. In February, as Russia prepared and launched its invasion, the country’s current account posted its highest monthly surplus in 15 years.
In view of higher prices and growing capital flows, the European contribution to Putin’s war chest has increased massively since the war began. Every day, enormous sums – on the order of €700 million – are transferred to Russian accounts. This money is used to pay mercenaries, missiles, and aircraft spare parts from countries that only sell against hard currency. More generally, about 40 percent of all Russian government budget revenues come from oil and gas. Without these revenues, Putin would struggle to finance his war machine.
Unfortunately, the debate on extending the energy embargo seems to have stalled. Although scientific studies suggest that the economic consequences for energy-importing countries would be manageable, a few key governments remain reluctant. In Germany, for example, the domestic industry lobby is adamantly opposed to action and, despite a public opinion that is generally supportive, finds its voice heard by the government. This is highly problematic for at least three reasons.
First, European leaders are signaling to Putin that he has power over Europe if they shy away from economically costly sanctions. This will encourage him to test Europe’s resolve even more. It also risks postponing the inevitable adjustment of European industry and consumers to the fact that Russian energy was never as cheap as it appeared. Finally, the continued flow of blood money paid for Russian energy sources allows Putin to push further ahead, dramatically increasing the long-term costs to Europe of containing a revisionist Russia.
At the same time, political reality cannot be denied. However short-sighted their reasons may be, important countries are not prepared to withdraw cold turkey with regard to Russian gas. To break this blockade, a pre-announced embargo could be implemented– perhaps over a six-week period. For example, the EU could immediately ban imports of Russian petroleum products, with the exception of diesel, while announcing that the ban would be extended to a new group of products each week: next, coal imports, then diesel, then sea shipments of crude oil, and finally pipeline oil. And finally, in six weeks, payments for gas imports would be made into escrow accounts from which withdrawals would be impossible for the duration of the war.
Committing to a future sanctions course that tightens restrictions according to an announced timetable would renew pressure on Putin and increase incentives for efforts to find diplomatic solutions. An immediate end to attacks on civilians and a withdrawal of Russian forces would halt the sanctions timetable.
In addition, advance notice of sanctions would provide European consumers of Russian energy with clarity about what adjustment measures are needed and how quickly. This would spur efforts to adjust consumption, rather than lobbying politicians in Berlin and other capitals to delay the inevitable. Moreover, by forcing industry to implement these adjustment measures, advance notice of sanctions would dramatically reduce the vulnerability of the European economy to Putin’s political blackmail maneuvers next fall.
The effectiveness of this policy depends on compliance with certain key principles. Most importantly, these sanctions must be of indefinite duration to avoid the usual political gridlock in the EU that would otherwise characterize efforts to prolong them. If unanimity were needed to abandon the tightening of sanctions, that would make this policy more credible. In addition, companies should be allowed to buy Russian energy products only to the usual extent until the embargo comes into full force. They would be prohibited from increasing imports to circumvent the embargo by bringing forward purchases.
The exact sequence of steps and their detailed breakdown can be decided on the basis of expert analysis of refinery operations to minimize short-term logistical costs for Europe. The current task is to define a staggered schedule of sanctions on Russian energy exports.
Time is playing against Europe. Meanwhile, a month has passed since the Russian invasion of Ukraine began. The longer the stalemate over energy sanctions continues, the more likely it is that Russia will be financially able to fight the West to the last Ukrainian.
Translated from English by Jan Doolan. In collaboration with Project Syndicate, 2022.
We are in the middle of the EU-NATO-G7 summit marathon. Yesterday evening, Council President Charles Michel was confirmed in office by the 27 EU heads of state and government. He ran unopposed and will thus remain Council President and President of the Euro Summit since 2014.
You can read about what was discussed in terms of content in our three analyses:
President Joe Biden and Commission President Ursula von der Leyen will announce a deal on energy partnership today. In the future, there will be guaranteed supply volumes from the USA, as Stephan Israel and Manuel Berkel learned in Brussels.
Also both sanctions Washington relies on cooperation with the EU. Biden announced new sanctions against Russian companies and individuals, but at the same time did not put pressure on EU countries, which remain very divided on the issue of energy embargo. Eric Bonse with the details.
Western allies continue to demand that Beijing clearly distance itself from Russia’s invasion of Ukraine, and China continues to shirk a response. Biden nevertheless expressed optimism that China will not side with Russia. But some important questions remain unanswered, write Amelie Richter and Christiane Kühl.
Done #DMA – that’s how EU Competition Commissioner Margarethe Vestager summed up the agreement on the Digital Markets Act in a tweet last night. Read about the points on which the EU has now reached an agreement in the news.
Agora Energiewende has calculated that Europe could be completely independent of Russian gas and oil imports by 2027 – if countries exhaust all available means. Read more about this in the news.
The scientists Lukasz Rachel and Moritz Schularick are certain that the sanctions imposed on Russia so far are not enough. Their proposal: a complete energy embargo, but with an announcement. The West should gradually reduce energy imports in order to protect companies – and to persuade Vladimir Putin to rethink.
The rendez-vous is scheduled to take place at 9 a.m. today at the US ambassador’s residence in Brussels. President Joe Biden and Ursula von der Leyen plan to present a deal there on supplies of liquefied natural gas to Europe, which the US hopes will help Europe replace Russian gas supplies. On the sidelines of the EU summit on Thursday, the Commission President spoke of a “new chapter” in an energy partnership with the US and an important step forward. Specifically, the US is to hold out the prospect of deliveries of up to 15 billion cubic meters of liquefied natural gas by the end of this year.
Last year, the EU purchased 22 billion cubic meters of LNG from the USA. Until now, however, the Americans had left it up to the market to decide how many ships carrying liquefied natural gas were bound for Europe. Now, the Biden administration wants to guarantee the Europeans specific delivery volumes. Biden is also likely to assure the EU that it will increase gas production in the USA and grant the industry additional production licenses. The USA also holds out the prospect of supplying the Europeans with hydrogen.
The time when the EU was open to blackmail was over, Ursula von der Leyen said. However, the new pledges from the US cover only a fraction of the gas supplies Europe has received from Russia so far. Last year, it was 155 billion cubic meters, most of which came via pipelines. After the announcement of the energy partnership this morning, Biden wanted to travel on to Poland and find out about the situation on the border with Ukraine.
At the EU summit in Brussels, the announcement from Moscow that Vladimir Putin would like to have energy deliveries paid for in rubles in the future was also a topic of discussion. Diplomats said that Putin wanted to test whether the Europeans were prepared to break or undermine their own sanctions. German Chancellor Olaf Scholz reacted calmly to the announcement. The currency in which payment is made is specified in the treaties. Putin wants to divide the alliance, tweeted Adam S. Posen, president of the Washington-based Peterson Institute for International Economics.
Russia is probably trying to drive a wedge between Germany and Italy – both of which are particularly dependent on Russian gas supplies – on the one hand, and the rest of the EU and the United States on the other. If Germany and Italy play Putin’s game and pay gas bills in rubles, the sanctions alliance will erode considerably, Posen wrote.
“By increasing demand for rubles, the exchange rate will be stabilized and the import taxation for Russia will stop. But by doing so, the EU would undermine the effects of its sanctions,” financial scientist Markus Demary of the Institut der Deutschen Wirtschaft (IW) told Europe.Table.
Alternatively, European importers could try to insist on compliance with contracts denominated in euros and dollars. “The EU could simply pay in euros. Then Russia could terminate the contracts and the EU would have to sue for the delivery volumes,” says Demary. But it is questionable whether this could be enforced in court.
The American Posen calls all considerations about the exact effects of the ruble announcement purely academic. Instead, it should be considered that the economic impact of a gas supply stop for Germany and Italy would be less than feared.
Economics Minister Robert Habeck (Greens) is not the only one to vehemently contradict this, pointing out the devastating consequences that the failure of individual goods would have on entire supply chains. It should also not be forgotten that the Federal Republic also passes on gas. “A gas embargo therefore also has effects beyond Germany’s borders,” said IW Director Michael Hüther.
On Thursday, the energy association BDEW also clearly intensified its warnings and demanded the proclamation of the early warning stage according to the emergency plan gas. “There are concrete and serious indications that we are entering a deterioration of the gas supply situation,” Chief Executive Kerstin Andreae had warned. “With Russian President Vladimir Putin’s announcement that gas supplies would have to be paid for in rubles in the future, effects on gas supplies could not be ruled out.”
The Ministry of Economics, however, rejects the proclamation of the early warning stage according to the “Emergency Plan Gas” of the Federal Government.” Currently, there is no supply bottleneck in Germany. Security of supply is guaranteed,” the ministry stressed on Thursday. “Therefore, there is currently no need for an early warning stage according to the emergency plan gas.” However, the situation is being closely monitored. With Stephan Israel
The EU and the US want to coordinate and align their sanctions against Russia even more closely than before. This was stated by EU Commission President Ursula von der Leyen and US President Joe Biden in a joint statement released on Thursday on the sidelines of the EU summit in Brussels. However, no new sanctions decisions were initially expected at the summit itself.
Already at the beginning of the two-day top-level meeting, which ends on Friday, hardly bridgeable differences among the 27 member states had become apparent. Austria’s Chancellor Karl Nehammer, for example, stated categorically that no embargo of gas or oil could be made with him. “We have already decided on massive sanctions,” he said. Now, he said, it is first necessary to see whether and how they work.
Luxembourg’s Prime Minister Xavier Bettel expressed similar views. New punitive measures would have to be taken in response to a new situation. However, the status quo in Ukraine had not changed. He was in favor of a gradual approach, he added. Belgium’s head of government Alexander De Croo also said new punitive measures were not necessary at the moment.
Germany took a middle position. At the present time, Chancellor Olaf Scholz said he was against an energy embargo. However, it was impossible to say how the war would develop and what measures would be necessary later. However, Scholz had previously threatened “additional measures” at the G7 meeting under his chairmanship. What these might be remained open in the G7 statement.
Poland, the Baltic states, and Slovenia spoke out in favor of tougher sanctions in the energy sector. Slovenian head of government Janez Jansa said an energy embargo was “on the table.” However, he did not expect a quick decision. Lithuania’s Prime Minister Gitanas Nausėda spoke of a “duty” to cut off supplies of oil and gas from Russia.
The US has already imposed an energy embargo. On Thursday morning, the US government also announced new punitive measures against more than 400 additional Russians and Russian companies. According to the White House in Washington, 48 defense companies, 328 members of the Duma, and bank managers are to be fined. Among them is the head of Russia’s Sberbank, Herman Gref, who, according to US reports, has been an adviser to Kremlin leader Vladimir Putin since the 1990s.
Biden, however, did not put pressure on the Europeans in Brussels. “My theme is unity,” he stressed. After Russia, China must now also be targeted, it was said in the environment of the US president. It is a matter of ensuring that sanctions against Russia are not undermined, he said. “China knows that its economic future is much more closely tied to the West than to Russia,” Biden stressed.
The US president scored an initial success at the G7 meeting. The heads of state and government “urgently appealed to all states not to provide Russia with military or other support for the continuation of its aggression against Ukraine.”
China was not mentioned directly in the five-page document. But Scholz confirmed at a press conference in Brussels after the G7 meeting that this part of the declaration was aimed at China. The EU plans to hold a summit with China on April 1. Until then, the pressure on Beijing is likely to increase.
The Western alliances want at all costs to prevent Beijing from moving closer to Russia or even supplying Moscow with weapons. During the marathon summit of NATO, the G7, and the European Union in Brussels on Thursday, politicians repeatedly called on China to distance itself from Russia. But so far, Beijing has responded in the expected manner. Not a word of criticism of Russia, but all the more of criticism of the United States and NATO.
US President Joe Biden nevertheless expressed confidence at the end of the long day that China would eventually turn against Russia over trade dependencies. “China understands that its economic future is much more closely tied to the West than it is to Russia,” Biden said of his conversation with China’s leader Xi Jinping after meeting with his G7 colleagues. Trust is good, but control is apparently better: Biden brought up the idea of a new body for NATO and the EU that would monitor whether and, if so, how other states circumvent sanctions against Russia. He was referring to China.
NATO Secretary-General Jens Stoltenberg was also clear after the defense alliance’s special summit: “Beijing should use its considerable influence on Russia and promote an immediate peaceful solution,” the NATO chief said. However, he did not say what steps NATO would consider in response to Chinese assistance to Russia. The summit declaration by Nato states also includes this demand. The member states had unanimously adopted the document – including Hungary, which had previously been rather reticent.
Stoltenberg had already accused China on Wednesday of supporting Russia in the Ukraine war with “blatant lies.” The US and Europe have criticized China for spreading Russian fake news about alleged US chemical weapons labs in Ukraine. “Accusing China of spreading false information about Ukraine is itself spreading disinformation,” a Chinese Foreign Ministry spokesman said in this regard on Thursday in what has become a familiar manner.
In their final statement, the G7 leaders were less direct than NATO: the group of states would keep an eye on whether the sanctions were being circumvented or undermined, they said – without naming China.
The Council of EU heads of state and government met late into the evening on Thursday. US President Biden also made an appearance there – in part to discuss a common position ahead of next week’s EU-China summit. “I think the messages to China were very clear. Please keep your distance,” Belgian Prime Minister Alexander De Croo said Thursday. The majority of EU leaders made similar statements.
Meanwhile, Beijing’s foreign office spokesman stressed that China’s position is in line with “the wishes of most countries.” “We have always believed that Ukraine should become a bridge between East and West and not be on the front lines of a game between superpowers, “but in the end, China tolerates exactly that: that Russia sees Ukraine as a buffer state to the West and as its own sphere of influence, with no say in its own role. Xi has spoken with some leaders since the war began, but not with Ukrainian President Volodymyr Selenskyj.
Meanwhile, China continues to try to avoid making a clear statement by all means: The less Ukraine becomes an issue at all at multilateral events, the better it is from Beijing’s point of view. Both Foreign Minister Wang Yi and Xi himself have been urging the Indonesian G20 presidency to remove the Ukraine conflict from the agenda of the G20 summit on the tropical island of Bali at the end of October. Indonesia has shown an open mind, it said. China is also in favor of inviting Vladimir Putin to the G20 summit table – but that has long since become unthinkable for many other states. On Thursday, US President Biden even spoke out in favor of Russia’s complete exclusion from the G20. Should this not be supported by other states, Ukraine should also be invited, Biden suggested.
However, Chinese Ambassador to the US Qin Gang hinted that cooperation with Russia could still have limits. “Cooperation between China and Russia has no prohibited areas, but there are guidelines (bottom line) for it,” Qin told the partly state-run Phoenix TV on Wednesday. These include the principles of the United Nations Charter, which is the basic norm of international law and international relations, Qin said. “That is the guideline we follow in bilateral relations between China and any other country.”
The pressure on Beijing will not ease anytime soon – it will also dominate the EU-China summit. The Ukraine war will be the focus of the virtual meeting on Friday next week, EU Council President Charles Michel wrote in the invitation letter to the other EU leaders.
The summit between Michel, EU Commission President Ursula von der Leyen, Xi Jinping, and Premier Li Keqiang is the first since June 2020. Last year, a date for a bilateral meeting was repeatedly postponed due to mutual sanctions in connection with human rights violations in Xinjiang. But the mood is not really good even now. No joint final declaration is expected for the summit – an indication that no one expects much progress. With Christiane Kühl
Russia’s brutal shelling of Ukrainian cities continues. Thousands die; millions suffer. But as for further action, the West remains paralyzed on the most important issue: sanctions on Russian energy exports. Until there is an immediate and complete boycott of Russian gas and oil by Western countries, the best course is to announce phased sanctions that will be implemented gradually over the coming weeks.
The West’s initial response to the Russian invasion followed quickly and was strong and impressively united. But it is becoming increasingly clear that it was at the same time inadequate. The effects of the initial shocks to which the Russian economy was subjected by the sanctions are fading. In recent days, the ruble’s exchange rate initially stabilized and then rose steeply. At the same time, yields on government bonds have fallen again. The consensus forecast for Russian GDP growth in 2022 is minus eight percent – a steep decline, but by no means a collapse.
It is not difficult to understand why the Russian economy and President Vladimir Putin’s regime have managed to withstand the sanctions so far. Energy exports – a crucial source of revenue for the Russian state – remain exempt from the sanctions list. In fact, steeply rising energy prices have actually provided the Kremlin with massive additional revenues. In February, as Russia prepared and launched its invasion, the country’s current account posted its highest monthly surplus in 15 years.
In view of higher prices and growing capital flows, the European contribution to Putin’s war chest has increased massively since the war began. Every day, enormous sums – on the order of €700 million – are transferred to Russian accounts. This money is used to pay mercenaries, missiles, and aircraft spare parts from countries that only sell against hard currency. More generally, about 40 percent of all Russian government budget revenues come from oil and gas. Without these revenues, Putin would struggle to finance his war machine.
Unfortunately, the debate on extending the energy embargo seems to have stalled. Although scientific studies suggest that the economic consequences for energy-importing countries would be manageable, a few key governments remain reluctant. In Germany, for example, the domestic industry lobby is adamantly opposed to action and, despite a public opinion that is generally supportive, finds its voice heard by the government. This is highly problematic for at least three reasons.
First, European leaders are signaling to Putin that he has power over Europe if they shy away from economically costly sanctions. This will encourage him to test Europe’s resolve even more. It also risks postponing the inevitable adjustment of European industry and consumers to the fact that Russian energy was never as cheap as it appeared. Finally, the continued flow of blood money paid for Russian energy sources allows Putin to push further ahead, dramatically increasing the long-term costs to Europe of containing a revisionist Russia.
At the same time, political reality cannot be denied. However short-sighted their reasons may be, important countries are not prepared to withdraw cold turkey with regard to Russian gas. To break this blockade, a pre-announced embargo could be implemented– perhaps over a six-week period. For example, the EU could immediately ban imports of Russian petroleum products, with the exception of diesel, while announcing that the ban would be extended to a new group of products each week: next, coal imports, then diesel, then sea shipments of crude oil, and finally pipeline oil. And finally, in six weeks, payments for gas imports would be made into escrow accounts from which withdrawals would be impossible for the duration of the war.
Committing to a future sanctions course that tightens restrictions according to an announced timetable would renew pressure on Putin and increase incentives for efforts to find diplomatic solutions. An immediate end to attacks on civilians and a withdrawal of Russian forces would halt the sanctions timetable.
In addition, advance notice of sanctions would provide European consumers of Russian energy with clarity about what adjustment measures are needed and how quickly. This would spur efforts to adjust consumption, rather than lobbying politicians in Berlin and other capitals to delay the inevitable. Moreover, by forcing industry to implement these adjustment measures, advance notice of sanctions would dramatically reduce the vulnerability of the European economy to Putin’s political blackmail maneuvers next fall.
The effectiveness of this policy depends on compliance with certain key principles. Most importantly, these sanctions must be of indefinite duration to avoid the usual political gridlock in the EU that would otherwise characterize efforts to prolong them. If unanimity were needed to abandon the tightening of sanctions, that would make this policy more credible. In addition, companies should be allowed to buy Russian energy products only to the usual extent until the embargo comes into full force. They would be prohibited from increasing imports to circumvent the embargo by bringing forward purchases.
The exact sequence of steps and their detailed breakdown can be decided on the basis of expert analysis of refinery operations to minimize short-term logistical costs for Europe. The current task is to define a staggered schedule of sanctions on Russian energy exports.
Time is playing against Europe. Meanwhile, a month has passed since the Russian invasion of Ukraine began. The longer the stalemate over energy sanctions continues, the more likely it is that Russia will be financially able to fight the West to the last Ukrainian.
Translated from English by Jan Doolan. In collaboration with Project Syndicate, 2022.
