The EU’s Self-Destructive Energy Bluff
The European Union announced the sixth round of sanctions against Russia last week which, like the previous five, is supposed to “destroy” the Russian capacity to finance the war in Ukraine. But, if approved, it will help destroy the European economies.
The new sanctions are imposed on 58 individuals, among whom alleged Bucha criminals, Kremlin spokesman Dmitry Peskov’s family and Patriarch Kirill, and include the exclusion of Sberbank from SWIFT, an oil embargo within six months; an embargo on oil products within one year; and the suspension of services from consulting firms to Russian entities.
By announcing a ban on Russian oil within six months, the EU is ironically favoring Russia by provoking an increase in oil prices and thus potentially in Russian revenues. European consumers will finance that increase at the gas station or at production sites. But in the meantime, Russia has time to find new customers for the oil, which is a much easier proposition than selling natural gas, since it does not need to be liquefied and then gasified before reaching consumers.
But even if Russia does not find new customers, its oil exports to the EU represent only 2.6% of the economy. So it’s not exactly a deadly blow.
Then there’s Brussels’ plan for reducing dependence on Russian gas. According to an assessment by Germany’s Jülich Research Center, the European Union will only be able to meet the target of filling gas storage facilities by two-thirds – a precondition for drastically reducing Russian imports next winter — if major industries are cut off from supply over the coming months.
Experts at the research center consider that to ensure that storage facilities are 63% full by Aug. 1, all (!) steel, chemical or cement plants in the EU must be disconnected from gas from now until the end of July, and gas-fired power plants will have to suspend work for almost all of July. This translates into a shutdown of major parts of the industry and short time work or even layoffs for several million workers.
“Filling storage facilities in accordance with the planned volumes and at the same time such a serious reduction in supplies from Russia will only be possible subject to significant restrictions on industry and power plants,” said Jochen Linßen, professor at the Jülich Research Center.