The G7 summit kicked off this morning in a castle in Bavaria and the war in Ukraine, sanctions and the threat food crisis are obviously on his agenda. Ahead of this meeting of Western leaders to which Russia has not been invited since 2014 in retaliation for the annexation of Crimea, Russian President Vladimir Putin announced that he would transfer “in the coming months” to Belarus missiles capable of carrying tactical nuclear weapons.
Note: this country led by Lukashenko, a longtime friend of Putin, located on the northern border of Ukraine, is particularly well placed to launch missiles on the main cities of northern Ukraine, Kyiv and Lviv. His announcement was promptly followed by bombs falling on Kyiv last night and damaging two buildings, injuring two.
In other words: Putin tells the G7 he is serious. The implied meaning: once Russia takes Donbass, it will turn to the rest of Ukraine and take Kyiv no matter what – even if it takes a nuclear attack.
Unsurprisingly, the G7 responded in the strongest terms:
The G7 countries will pledge to support Ukraine indefinitely, – Bloomberg. We will provide financial, humanitarian, military and diplomatic support and support Ukraine for as long as necessary,” reads the text of the draft declaration. pic.twitter.com/zoVRzd6o7g#UkraineRussiaWar
— Ukrainian News24 (@MarkRid89403375) June 26, 2022
It is not yet clear what this indefinite support will consist of. According to Reuters tonight (18:00), there is talk of four of the rich countries of the Group of Seven set to ban imports of Russian gold tighten the pressure of sanctions on Moscow and cut off its means of funding the invasion of Ukraine. We also talk about possibly cap Russian oil prices – but clearly this is unlikely to be effective (Russia will always find buyers in a rising market).
In short, “indefinite support” that includes nothing more than the supply of weapons and sanctions against Russia is unlikely to be sufficient or effective if Putin really means what he says: will the West will he also tolerate a limited nuclear attack on Ukraine?
Does he really think so? Who knows, opinions differ, but it clearly needs to be taken seriously, more seriously than Merkel and other Western leaders, including Trump, ever have. In this case, what is the solution, and how to move forward?
Any G7 recommendation for better coordination of sanctions against Russia will not be enough. Recall that the 6th package of EU sanctions, the one targeting Russian oil exports, is in fact incomplete. Because, as we all know, sanctions only work if they are watertight – that is certainly not the case with this latest round of European sanctions which – under pressure from the Hungarian Orban, another friend of Putin – is except waterproof. In fact, it will only become fully applicable in two years.
Why the G7 should stop talking about sanctions
Any call from the G7 for “better coordination of sanctions” is pure nonsense, pap to appease an increasingly angry public.
Because the anger is palpable, we are all angry at rising energy and food prices, here in Europe, America and elsewhere – see the issues in Ecuador where indigenous people protested the rising cost of life by besieging the capital for 12 days. The situation there has turned into a government crisis and the president is expected to be overthrown by parliament.
And that’s just the beginning. Watch what happens when the food crisis is in full swing, with some 27 million tonnes of grain for export stuck in Ukraine. It is estimated that up to 4 million tons of grains and oilseeds are in terminals and on ships stranded in ports, particularly in Odessa, Ukraine’s main port on the Black Sea. And no one really knows how to unblock this situation, with the Russian navy camped in front of Odessa and the sea full of Ukrainian mines.
And then there is the energy crisis. With soaring oil and gas prices, the big winner has been Putin despite sanctions, whether they come from the United States or Europe.
I have deliberately bolded the sentence above because that is the main point: the sanctions have created a situation that has benefited Putin, filling Russia’s coffers with money and allowing him to continue to lead his war happily.
In fact, the ruble has never been stronger – reaching its highest level in 7 years despite sanctions – when one would normally expect a country at war to see its currency weaken. Nothing like this happened because Russia is an oil state, and if the price of gasoline goes up, it wins. And that’s it, pure and simple.
Khodorkovsky, a Russian oil tycoon and former friend of Putin, now one of his staunchest critics, has no doubt: as he recently says Politicothe sanctions do not work, “Europe is sabotaging itself”.
What should the EU have done? According to him, he should have guaranteed alternative supplies before going ahead with an embargo, or even taken an entirely different approach, simply imposing tariffs on Russian energy rather than an outright ban.
He is not the only one to argue this way: several experts from the Bruegel think tank pointed out this it would have been smarter to impose tariffs because redirecting oil to other countries with the infrastructure currently in place would have been difficult for Moscow. This would have forced Russian energy companies to absorb the higher export costs to Europe, squeezing their margins and ultimately reducing Moscow’s military budget.
The fact is this: by “digging a hole in its own finances”, Europe has become weaker and less able to finance the purchase of more weapons for Ukraine.
Khodorkovsky has no doubt: “The problem is that current Western politicians have never had discussions with a gangster,” he said, referring to Putin. “You can only start negotiating with him when he feels like he’s in a weaker position.”
And the the sanctions have been a real boomerang. “How much revenue has the West lost by introducing all sorts of energy sanctions? $100 billion, $200 billion? he said. “If Ukraine had gotten at least $50 billion worth of weapons instead of $10 billion, the situation would be completely different now – without any energy sanctions being introduced.”
The EU revised down its growth forecast for this year of around 1% in April following the war in Ukraine which has cost some 160 billion euros so far, according to recent GDP estimates of the International Monetary Fund. Meanwhile, the EU has put in place several tranches of financial aid, now amounting to 2 billion euros for the purchase of arms for Ukraine.
These figures speak for themselves: one has to wonder what our political leaders thought.
If not more sanctions, what? Driving down oil prices by flooding the market
If it’s too late to impose tariffs on Russian exports (although this measure is still available), why not just turn to Saudi Arabia with which America has had close ties (since President Bush and of course Trump) and obtain, with Saudi support, a change in OPEC’s oil policies?
Flooding the market with oil would instantly lower prices and cause a structural problem for Putin whose financial tap would suddenly dry up. It would weaken him and, as Khodorkovsky says, in his gangster mentality, that’s something he understands. Low energy prices, coupled with Ukraine’s continued arming, will likely be enough to induce it to negotiate for peace.
The benefits of low energy prices do not end there, however. With cheap oil, you can transport Ukraine’s tons of wheat overland and you don’t need to use the Odessa sea route which is currently blocked by the Russian Navy and Ukrainian mines.
Putin may feel like he has leverage over the world fearing an impending food crisis and he even uttered so many words, saying he was ready to discuss some sort of deal – a exchange, if you will, to lift the sanctions against Ukraine. wheat to export. Obviously, so far, no one in the West has responded to this specific proposal, and probably no one will.
Given the deadlock over a grain deal, it is smarter to attack Putin from another angle, the “oil angle”. And if the maritime route of Ukrainian exports is now blocked, nothing prevents Ukrainian farmers from sending their cereals by other routes, those followed so far by the refugees, that is to say by land, mainly by the Moldavian and Polish borders.
Food crisis solved!
Editor’s note: The opinions expressed here by Impakter.com columnists are their own and not those of Impakter.com. — In the featured photo: an official event in March 2015: Putin awards Lukashenko the Order of Alexander Nevsky. Official source: en.kremlin.ru