The European Union has now exhausted the possibilities for increasing economic pressure on the aggressor. This is evidenced by the VII package of sanctions, approved in Brussels on July 18.
According to Hungarian Foreign Minister Péter Szijjártó, the document does not contain new restrictions on russian goods and their producers, primarily in the energy sector.
Mainly, the previously taken measures regarding the ban on companies from the russian federation and Belarus from participating in tenders that are held for the EU money are being clarified and supplemented.
Also, the EU is strengthening the bureaucratic regulation of imports and exports of dual-use products in trade with russia. That is, the goods that can be used for both peaceful and military purposes.
At the same time, high-ranking officials in Brussels urge not to panic and wait for the effect of previous package sanctions.
Thus, on the economic front, Ukraine's allies are moving from offensive to waiting. That is, here the war enters a positional phase too – when the parties sit in the trenches and wait for someone to run out of ammunition first.
The return of a repaired turbine for the Nord Stream 1 gas pipeline from Canada to Germany, which allowed the russian Gazprom state concern to resume pumping gas to the EU along this route, also testifies to the weakening of pressure. Previously, a Siemens turbine "hung" at a repair plant in Canada due to sanctions restrictions.
However, encouraging signals are coming from across the ocean…
Gold, gas, oil and coal embargo
In fact, the VII package of sanctions contains new restrictions. It provides for a ban on the import of russian gold into the EU. The same P.Szijjártó confirmed to journalists the presence of the gold embargo in the document.
However, its impact on the russian economy will be minor.
In turn, head of the EU diplomacy Josep Borrell assured that the sanctions are already beginning to have an effect and will intensify in the coming months. According to the European Commission, the ban now covers 48% of russian exports to the EU, or €73 billion a year.
In this regard, J.Borrell called for "strategic patience". His words were addressed primarily to European business, which bears certain losses from the curtailment of partnership with the russians. But it can also be seen as an appeal to Ukraine.
At the same time, the head of European diplomacy clearly promised "a quick detoxification from russian energy". That is, refusal of the EU to import energy resources from the russian federation. The results of the visit of President of the European Commission Ursula von der Leyen to Baku, which took place on July 18, are positive within the context.
According to the document signed in the capital of Azerbaijan, the supply of Caspian gas to the European market will increase by 2.5 times. That is, it cannot be said that the EU is not trying to reduce dependence on russian energy resources.
Another thing is that Azerbaijan is not a major gas producer. At the end of 2021, it exported 8.5 billion m3 to the European Union. Next year, 12 billion m3 is planned. The parties will reach the volume of 20 billion m3, declared in the memorandum, in a few years.
Ukraine cannot wait that long when its cities are subjected to daily rocket attacks from the russian federation. Especially considering that the annual volume of russian gas exports to the EU is 158 billion m3.
Nevertheless, there are still encouraging signals regarding the gas embargo. On June 28, the Seimas of Lithuania banned the import of russian gas into the country. The same decision was made on July 14 by deputies of the Latvian parliament.
Undoubtedly, the Baltic republics are not such large customers of Gazprom as Germany. But!
The very fact of creating such a precedent is important: when the use of russian energy resources is prohibited not by the government decisions or a presidential decree, but precisely at the legislative level.
And when the precedent already exists, it is much easier for official Kyiv and its political allies to seek similar measures from other countries.
As for Germany, the coal embargo against the russian federation comes into force from August 1. That is, the import of russian coal is completely prohibited.
This is a rather tangible blow: the German economy is the most powerful in Europe and 40% of its coal imports previously came from russia. Hello to the Kremlin "experts" who promised to find the use of coal from the occupied areas of Donbas in the russian economy. Now the russian federation has nowhere to put its own coal.
Germany will completely stop buying russian oil from January 1, 2023. However, the oil embargo against the russian federation, in fact, is working already now.
According to the results of January-May, the European Union became the largest buyer of American oil for the first time in 6 years. In turn, they are also trying to "cut off" russian oil exports overseas.
The shadow of the cartel
When several large and influential participants (companies, enterprises or even entire countries) agree among themselves on an agreed pricing policy – this is the worst thing that can happen in the market for consumers.
Since the ultimate goal of such agreements is always the same – to inflate prices and rip off buyers.
Therefore, there are sky-high fines for cartel collusion in the legislation of all countries. Their sums in the USA and the EU amount to tens of billions of dollars and euros.
But in the conditions of war, the cartel can become an effective economic weapon against the aggressor, according to Washington. It understands that it is unrealistic to convince everyone without exception to refuse oil from the russian federation. So it goes the other way.
American officials form a pool of the largest buyers of russian oil and agree on limits on its price. This is primarily about China and India.
After the EU actually abandoned russian oil, its main export flows "flowed" (actually, this is not a pipeline, but a tanker delivery) to India and China. What is true, they don’t want to give a lot of money for sanctions oil.
According to Reuters and Bloomberg, which refer to traders' data, the discount to the market price for such transactions in May-June was in the range of $30-40 per barrel.
For understanding: the average market price of Urals russian oil in May was $83/bbl. That is, the Chinese and Indians bought this resource cheaply, at almost half the price.
How long the kremlin is ready to give away oil for nothing is a good question. Since, according to expert data, $40/bbl is the maximum cost of russian oil production. But Washington does not want to wait for an answer.
At the July meeting of G20 finance ministers in Indonesia, US Treasury Secretary Janet Yellen announced an initiative to impose restrictions on the cost of russian oil. She also reported on the talks on this topic held with colleagues from India, Singapore, Saudi Arabia, Turkey, Australia and South Africa.
The representative of the US State Department, in turn, reported on the US-Indian talks on this issue at the level of expert working groups.
Obviously, their results will depend on how willing Delhi is to ignore political tensions in relations with the USA (they are dissatisfied with American support for neighboring Pakistan, which in turn helps Muslim separatists in the Indian states of Punjab and Kashmir) for the sake of colossal economic benefits.
However, the very fact of the talks testifies to the interest of the Indians and gives a certain reason for optimism.
It is backed up by the announcement by Deputy Treasury Secretary Walter Adeyemo that compulsory restrictions on the cost of russian oil for the European market will come into force as early as December this year. It remains to stock up on "strategic patience"…
Vitaliy Krymov, OstroV