As the trade war over Ukraine heats up, we should ask ourselves what costs and benefits come along with energy independence from Russia. Even if we accept current Western policy, the divestment campaign will not yield the desired political outcomes.
As episodic breezes of cooler air reach European shores, the continent’s inhabitants are reminded by the fact that winter is gradually but surely creeping up on them. Thus, Europeans are getting ready for a tough winter in the midst of the escalating trade conflict over Ukraine. But instead of prioritizing an uninterrupted and affordable flow of energy, the European Union has doubled down on its policy of rapidly divesting from Russian fossil fuels.
On February 24, the starting day of the Russian invasion of Ukraine, European Commission President Ursula von der Leyden announced “massive” sanctions beyond those already implemented after the Russian take-over of Crimea in 2014. But in the months since, as the West has placed itself firmly behind Ukraine, the European Union (EU) has gone much further than traditional sanctions.
Following on the heels of Washington, the 27-nation bloc has made plans to wean itself completely off Russian fossil fuels. Whereas an American ban of Russian oil, gas, and coal went into effect in March, the EU, which is much more dependent on Russia for its energy consumption, seeks to accomplish this task over the next five years. Crude oil transported by sea will be banned as early as December 5 of this year, while an embargo on petroleum product imports will follow two months later. Phasing out the import of Russian natural gas, which constitutes about 40% of the EU’s import total, is a tougher task. Yet, the EU is determined to achieve independence from Russian gas by 2027 through a 210 billion euro plan consisting of three ledgers: in addition to an import shift to more non-Russian gas, the EU is to slash energy consumption by 13% and bring the share of renewable energy up to 45% by 2030.
The EU recognizes that Europeans will suffer from these policies. On Wednesday, Von der Leyden admitted in a speech that “making ends meet is becoming a source of anxiety for millions of businesses and households.” Yet, she stood undeterred in the “unshakeable” EU solidarity with Ukraine, arguing that “we are in for the long haul” and that “this is the time for us to show resolve, not appeasement.” She was convinced, moreover, that “Putin will fail, and Europe will prevail.”
In short, the divestment plan is seen as worth the price of rolling back Russian aggression in Ukraine while it gives a helpful boost to the EU’s ambitious climate goals. But is the price really worth it? Do the benefits outweigh the costs?
First of all, it will not help the climate. As long as European countries keep on shunning nuclear energy, banning Russian oil and gas will crank up the production of coal, which emits much more CO2. Rising coal consumption and CO2 emissions were already documented in anti-nuclear countries like Germany before the war began, and these developments have exacerbated since. Moreover, as Russian coal used to make up 70% of all European imports but is banned completely as of August, the import of coal from other countries (which is expected to increase by almost 50% by next year) will undoubtedly make energy more expensive.
But that is only the tip of the iceberg. Consumers will pay a much higher price for the divestment plan than the 210 billion euros that the EU has set aside for the purpose. To get an idea of the true cost, we need to be aware of the seen and unseen effects of the EU’s energy policy. For one, the European-Russian gas infrastructure, in which European companies have invested untold billions over the last few decades, will go to waste. This path of dependency has created a situation in which Russia has become the main exporter of fossil fuels to Europe and thus is in a position to provide energy at a cheap price. Changing the energy mix by government decree will therefore lead to soaring energy prices, especially at a time of already out-of-control inflation.
Indeed, a recent report from Goldman Sachs estimates total expenditures on energy in Europe to grow by $2 trillion this year, and that is only counting households. According to the report, the typical European household will probably pay more than three times more on their monthly energy bills this winter. If Russia will turn off the gas tap completely, as Putin threatened to do last week, the price of energy could rise almost fourfold compared to last year, reaching as high as 600 euros for the average family unit.
Meanwhile, paradoxically, Moscow has profited from the European divestment plans, at least in the short run. In the first hundred days of the conflict, Russia’s fossil fuel revenues, which make up close to half of its federal budget, have reached a record 93 billion euros. According to the The New York Times, these exports exceed what the country is spending on its war in Ukraine. Even if European imports of oil halt completely by the end of the year, Russia can shift its oil exports to China, which has become the largest importer of Russian fossil fuels in the course of the war. Redirecting Russian gas exports to the East will require hundreds of billions and take decades, however, as Russian pipeline and LNG infrastructure is developed with the goal of supplying gas to Europe. In the long run, European divestment from Russian fossil fuels will therefore certainly hurt Moscow, as it will hurt Brussels.
But overall, it does not look like the war has so far hurt the Russian economy much more than the European economy. For instance, the ruble has hit its strongest level in seven years this summer, while the exchange rate of the euro has precipitately declined as the inevitable effect of the massive monetary inflation since the beginning of the coronavirus pandemic has kicked in. It is certainly possible that the strength of the ruble is a temporary illusion, however, as Western sanctions have decreased Russian imports. Again, Russia suffers from the war economically, as does Europe.
Economic sanctions are a popular tool in the Western foreign policy tool kit. Especially since the end of World War I, sanctions have become a common alternative to open warfare. Yet, a careful examination of 115 sanctions between 1914 and 1990 has demonstrated that only in five instances can they (i.e., not additional policies) be said to have caused the desired political effect. This low rate of success is in large part the result of the “rally around the flag” effect. Economic sanctions tend to disproportionately affect the poor, which has the unintended effect of disempowering the population and playing into the hands of the victimization discourse of the target government. Often, this makes the enemy regime more popular, as in the current crisis. Putin’s approval ratings have increased from somewhere around 65% in 2021 to more than 80% since the beginning of the war.
Still, if the EU and its allies are in it “for the long haul,” perhaps they will eventually break the popular support for the war inside Russia. The recent Ukrainian successes on the battlefield may help the Russian people realize that little can be gained from continuing the war. If the world then shows its unity in solidarity with the Ukrainian people by isolating Russia, this process might be sped up. But it is precisely that unity which is lacking.
The most cited successful sanctions effort in recent history is undoubtedly the boycott, divestment, and sanctions campaign against Apartheid South Africa, in which civil society groups around the world led the way in voluntary boycotts for decades before Britain, the United States and other countries slapped on national sanctions in the late 1980s. Such a show of global disgust with the Russian war on Ukraine is lacking. Inhabitants of Western countries might appear united in their “unshakeable” solidarity with Ukraine, but this support will come under increasing duress as the energy crisis unfolds. More importantly, there is no international unity beyond the Western world. Most countries in the Global South have taken an apathetic stance. Only a handful of small countries that had not previously put sanctions on Russia joined in the recent sanctions effort. Moreover, most of the large non-Western nations, such as Brazil, India, and China, refused to condemn the invasion and have maintained, if not expanded, trade relations with Moscow.
It is thus improbable that Western divestment from Russian fossil fuels will convince Moscow to halt its invasion, let alone induce a popular revolt against Putin. Other factors, be they of a military or diplomatic nature, will be much more decisive.
What the divestment campaign will accomplish, however, is fostering the reemergence of a bipolar world order. Even before the war, the Biden administration decided to rhetorically divide the globe into a democratic and an authoritarian camp. Now, the alienation of Russia from the West is pushing Moscow into Beijing’s arms ever more than before, thereby turning the Wilsonian crusade pitting democracy against authoritarianism into a self-fulfilling prophecy. The West should not be all too sure that it will win this cosmic battle. A global poll from 2021, for instance, demonstrated that the respondents in fifty-three countries were more concerned about the American threat against democracy in their country than they were of Russian or Chinese influence.
Much of this global distrust of the West of hinges on Washington’s interventionist foreign policy around the world, which makes for easy rhetorical fuel to help people “rally around the flag” in authoritarian countries and support the creation of anti-Western alliances. This week, for instance, Putin met with both India’s Narendra Modi and China’s Xi Jinping. Undoubtedly, Putin and Xi exchanged views on how to counter what they see as malign Western intrusion in their own traditional spheres of influence, including Ukraine and Taiwan. Whatever Westerners may think of that, many people in Russia, China and around the world agree with that sentiment.
European divestment from Russian fossil fuels will exacerbate this descent into new cold war blocs. If the EU is serious about abandoning the European-Russian natural gas infrastructure, so symbolic of Western Europe’s détente policies during the Cold War, it will eventually make way for an energy grid that connects Russia with the East instead. Indeed, in July Mongolia confirmed the onset of the construction of a Siberia-China gas pipeline through its country in 2024, while the EU signed a contract to double gas imports from NATO Partnership for Peace participant Azerbaijan.
In the United States, some segments of the foreign policy elites are starting to see the implication of the current Western strategy. Foreign Affairs, for instance, recently ran an article pressing for a strategy that is geared towards convincing Moscow that “its destructive imperial tendencies are leading it to the bleak future of becoming a vassal of China.” The authors did not oppose short-term sanctions and military aid to Kyiv, but they stressed that, in the long run, the West needs to demonstrate a desire to avoid military escalation and prevent political chaos and/or an economic meltdown inside Russia. In other words, Russia should eventually be a partner again, not a foe.
In addition to having a counterproductive economic and political impact, the severing of energy relations might lead to a much deeper political—even cultural—break-up between East and West. This rift risks the creation of a new cold war climate, which, in turn, is a precondition for intentional military escalation. This is ultimately what the current policy amounts to. Indeed, grasping for reasons why states engage in sanctions in spite of their ineffectiveness, the above-mentioned study on 20th century sanctions concluded that they often serve a more sinister goal: “leaders often use sanctions not for international coercion but for domestic mobilization, giving peace a chance in order to disarm criticism of the use of force later.” Brace yourselves.
A last defense of divestment is that it does not serve the traditional function of temporary punishment at all. Rather, breaking economic ties with Russia in the long term is seen as a virtue, because it would break Europe free from using restraint in its foreign policy toward Moscow. Western officials and pundits routinely talk about how Putin engages in “blackmailing” Europe by “weaponizing” energy when he threatens to turn off the gas tap. If the EU would not be reliant on Russian energy imports, however, Brussels would be undeterred in taking a tougher stance against the Kremlin.