Punishing Vladimir Putin and Russia for their aggression against Ukraine will cost us at home. Because to hit Russia where it really hurts, we’d have to hurt everyone.
Russia is a top oil and natural gas producer, so the world is addicted to its exports. In fact, the European Union depends on Russia for more than a third of its natural gas.
That’s why Germany’s move to cancel the certification of the Nord Stream 2 pipeline that would deliver Russian natural gas to Germany is so dramatic. Russia’s ex-president seemed to gloat about the EU’s dependence Tuesday, tweeting, “Welcome to the brave new world where Europeans are very soon going to pay 2.000 euros for 1,000 cubic meters of natural gas!”
The most effective way to target Russia with sanctions is to cut off its supply of oil and natural gas to the West. But that could trigger even higher prices and more pain for consumers. Oil prices already are near 8-year-highs and serve as a major driver of inflation. It is already taking a toll politically and these decisions will be tough to enact for the West’s leaders.
“The president of the United States has to worry about his domestic polls heading into a new election season and leaders in Europe have their own domestic political constraints as well,” CNN political analyst Josh Rogin told me. “It ends up limiting the range of responses, the range of action that the allies can put into place in response to Putin’s aggression. Of course, Putin knows that. That’s a reality of democracies and it’s an advantage for Putin that he’s sure to exploit.”
The White House and allies have announced their first round of sanctions — on two banks, sovereign debt and some oligarchs — with more sanctions coming if Putin persists. Biden acknowledged sanctions would take a toll on Americans, too.
“Defending freedom will have costs for us as well and here at home,” President Biden said Tuesday. “We need to be honest about that.”
He called it “critical” to “blunt” higher energy costs.
“We’re closely monitoring energy supplies for any disruption and executing a plan in coordination with major oil producing consumers and producers toward a collective investment to secure stability and global energy supplies,” Biden said.
What could that mean? Pressure on producers to open their spigots, coordinated releases of strategic oil stockpiles with allies, a gas tax holiday, or incentives for domestic shale producers.
But the president’s tools are limited.
“We have levers, Putin has levers and when we’re all done pulling all of our levers, we are back to square one,” Rogin said. “The Russians’ ability to manipulate the energy markets will always be greater than the Europeans’ ability to mitigate those manipulations.”
In the meantime, Greg Valliere of AGF Investments is telling clients to expect Russian pushback with three main goals: “Driving much of the West into a high-inflation economic crisis; dividing the US between isolationists and internationalists, and launching a cyberwarfare assault on the US and Kyiv, disrupting everything from ATMs to corporate boardrooms.”