Time to Sanction Gazprombank

By Kevin D. Williamson

Wednesday, April 06, 2022

 

Are we still serious about sanctions?

 

The Biden administration has announced that its latest round of sanctions will add Sberbank — with its 110 million individual clients and 1 million corporate customers — to the blacklist. That is welcome.

 

But the next big step that needs to be taken — the obvious step — apparently is off the table for the immediate future. I mean, of course, putting full sanctions on Gazprombank, the financial institution the Kremlin uses as a backdoor for its overseas buyers. In order to prop up the crumbling Russian currency, Putin has demanded that foreign buyers settle in roubles (in violation of existing contracts), but is also allowing them to set up special accounts in the Putin-controlled financial institution as an alternative.

 

The only reason Gazprombank has been spared anything beyond relatively toothless sanctions is that it facilitates the gas trade between Russia and the countries that are highly dependent on its gas exports, particularly (but not exclusively) Germany. The United Kingdom already has enacted such sanctions, but the European Union is frozen in fear.

 

The thinking here is dangerously short-term: Our European allies are worried about getting cut off from Russian gas in the near future in response to sanctions, but it is very likely that they will end up being cut off, anyway, as Putin attempts to use gas supplies to bully them into letting up on the other sanctions already in place.

 

Better to act than to react.

 

Germany doesn’t need a Plan B for this eventuality in six months — it needed one years ago. Having failed to produce such a plan, it needs one now. There are promising options: There are substitutes for gas, there are LNG supplies from the United States and elsewhere, and there is the fact that the Russian pipeline is not the only pipeline serving European buyers.

 

Less powerful countries than Germany are finding a way. “Lithuania won’t be consuming a cubic centimeter of toxic Russian gas,” Prime Minister Ingrida Šimonytė announced a few days ago. “If we can do it, the rest of Europe can do it too!” President Gitanas Nausėda added.

 

Lithuania intelligently invested in that thing we Americans are always talking about: infrastructure. In Lithuania’s case, that infrastructure was a natural-gas terminal that allowed the country to diversify its providers. Not only is it liberating itself from Russian dependency, it is now exporting gas to Latvia and Estonia, and will soon begin exports to Poland.

 

The United States and Germany are two of the richest, most technologically accomplished, and most logistically capable countries in the world. One of them needs to buy a lot of gas, and the other one has a whole lot of the stuff to sell. We should be able to work something out. And we must, because our goal here should not be to keep a lucrative supply of natural gas flowing from Russia — it should be to usher in a post-Putin future as quickly and as bloodlessly as possible.

 

We should be sanctioning every Russian business, from Gazprombank to the last potato farmer. But we should start by getting serious about Gazprombank and the rest of the energy sector.

 

If we want sanctions to actually do something meaningful, we have to be willing to pay a price ourselves — trade is a two-way street, and interrupting that trade means two-way pain. Better to endure that pain here and now — perhaps intensely, but briefly — than to drag it out to such an extent that the sanctions do not accomplish anything of lasting value. That pain will fall more heavily on Europe than on the United States, because Europe has electively hobbled its own energy industry, its gas industry in particular. (Three cheers for American fracking!) But the United States does have extraordinary resources that can be put into play to mitigate it.

 

It will be painful and expensive. But it will still be a hell of a lot less painful and less expensive than the other two alternatives, which are (1) war, or (2) letting Vladimir Putin and his dog-eating rapist army run amok.