Until Joe Biden Lets U.S. Oil Freely Flow, He’s Complicit In Putin’s War Crimes

 

Until Joe Biden Lets U.S. Oil Freely Flow, He’s Complicit In Putin’s War Crimes

Not sanctioning Russia’s energy sector neutralizes other western sanctions and damages the credibility of the U.S. and our European allies.

By: Helen Raleigh, The Federalist, March 04, 2022:

As Russia continues its invasion of Ukraine, the United States and western allies have imposed a new round of economic sanctions. But these won’t achieve the desired effect as long as there is a carve-out for Russia’s energy sector.

Last week, the United States imposed sanctions on four large Russian banks and restricted certain Russian state-owned enterprises from raising money in international markets. On Monday, the U.S., the European Union, and the United Kingdom took an extraordinary step to sanction Russia’s central bank, the Bank of Russia, preventing it from moving assets it held abroad to stabilize Russia’s economy, or “using other government and private banks to manage central bank operations.” Additionally, the U.S. Department of Treasury prohibited Americans from doing business with Russia’s central bank, finance ministry, and Russia’s sovereign wealth fund. No country’s central bank had ever been sanctioned like this before. According to officials from the Biden administration, these latest sanctions targeting Russia’s banking and financial systems represent the West’s “biggest sanctions campaigns in the past half-century.”

Consequently, the Russian ruble tumbled more than 20 percent. At the market close on Monday, one ruble was worth less than 1 cent. The ruble’s devaluation will negatively affect Russia’s economy in many ways. It will worsen the country’s already high inflation (Russia’s inflation rate was 8.7 percent in January 2022), lower the living standard, and make it hard for Russian companies to raise capital for existing business operations or future expansion.

The ruble’s devaluation also hurts consumer confidence and may even cause a run on the bank. Nervous Russians reportedly lined up outside of banks and ATMs to get their money out, a scene the country hadn’t seen since the fall of the former Soviet Union in 1989.

In response, the Bank of Russia was forced to raise the interest rate from 9.5 percent to 20 percent and close the country’s stock market for this week. The central bank also ordered Russian companies to sell 80 percent of their foreign-currency revenue. The move was designed to stop the ruble from falling further by creating artificial supply-demand and giving the central bank access to foreign currencies such as U.S. dollars. The ruble bounced back some the next day due to these measures. As of Tuesday morning, one ruble was worth 8.6 cents.

Energy Sector Exempt

No doubt, the latest round of western sanctions has caused some damage to Russia’s economy. But they are not as effective as they could have been because Russia’s energy sector is exempted. Russia’s energy companies continue to export oil and gas worldwide, making phenomenal profit due to skyrocketing energy prices, and evade sanctions by bringing badly needed foreign currencies back to Russia.

The energy sector plays the most vital role in Russia’s economy, which is about the size of South Korea’s. Russia’s energy sector accounts for 14 percent of the country’s GDP. The country is the world’s largest natural-gas exporter and one of the main oil suppliers. Revenue from the energy sector has helped Russia accumulate $630 billion in foreign exchange reserves in recent years and contributed to more than 40 percent of the country’s federal budget.

A study by the Kiel Institute for the World Economy, a think tank based in Germany, shows that an “embargo on gas would drag Russia’s GDP down by nearly 3 percent and halting imports and exports of crude oil would result in a slump of more than 1 percent.” However, by leaving Russia’s energy sector alone, current western sanctions may knock out Russia’s GDP by only 1 percent.

https://gellerreport.com/2022/03/biden-lets-russia-oil-freely-flow-while-shutting-down-american-oil-hes-complicit-in-putins-war-crimes.html/