By Jim Geraghty
Monday, April 11, 2022
Why is the Biden administration so convinced that
sanctions will eventually compel Vladimir Putin to stop the invasion of
Ukraine?
Yesterday, President Biden’s national-security adviser,
Jake Sullivan, pledged that,
“We will continue to squeeze the Russian economy so that Russia and the Kremlin
feel the pain from what they have done in Ukraine. And in the meantime, we will
keep working on additional ways to deny them revenue.”
No one doubts that the sanctions are inflicting economic
pain on Russia; the more consequential question, which has been asked for
a while now, is whether they’re having any effect on Putin’s decision-making
and the Russian military offensive. And keep in mind, a sanctions regime is
only as effective as its enforcement, and there are still plenty of ways for
Russia to sell its goods on a global market. From
oil exports . . .
Russia expects to earn 798.4
billion rubles ($9.6 billion) in additional revenue from energy sales in April
due to high oil prices, the finance ministry said, as Moscow needs cash to
finance its obligations while being cut off from its reserves.
. . . to
exploitable loopholes for oil sales to Europe . . .
When is a cargo of Russian diesel
not a cargo of Russian diesel? The answer is when Shell Plc, the largest
European oil company, turns it into what traders refer to as a Latvian blend.
The point is to market a barrel in
which only 49.99% comes from Russia; in Shell’s eyes, as long as the other
50.01 percent is sourced elsewhere, the oil cargo isn’t technically of Russian
origin.
The maneuver underpins a burgeoning
and opaque market for blended Russian diesel and other refined petroleum
products, one of the many that oil companies and commodity traders are using to
keep Russian energy flowing into Europe while at the same time satisfying
public opinion that demands an end to subsidizing Vladimir Putin’s war
machine. . . .
In the oil market, traders whisper
about a “Latvian blend” — a new origin for diesel that looks like a workaround
to supply Russian product mixed with something else. The typical trade goes
from Primorsk, a Russian oil export town near St Petersburg, into Ventspils, a
port in Latvia that has a large oil terminal and tanking capacity. That’s where
the blending takes place. There are many other locations where blending is
happening, including in the Netherlands, and on the high seas, in what traders
call ship-to-ship transfers. For many in the market, the Latvian blend is
simply shorthand for any blend that contains Russian molecules, regardless
of where the mixing took place.
. . . to
natural-gas exports . . .
Russian state-owned energy giant
Gazprom continued to supply natural gas to Europe via Ukraine on Wednesday in
line with requests from European consumers, the company said.
Gazprom said the request for gas
exports to Europe through Ukraine had been set at 108.3 million cubic meters
for April 6, similar to the request for April 5.
. . . to
Russian coal exports:
European Union envoys are set to
approve on Thursday a ban on Russian coal that would take full effect from
mid-August, a month later than initially planned, two EU sources told Reuters,
following pressure from Germany to delay the measure.
Add it all up, and
somehow Russia is actually going to make way more money from
energy exports this year than last year, despite having invaded Ukraine on
February 24: “Bloomberg Economics expects Russia will earn about $320 billion
from energy exports this year, up by more than a third from 2021. The ruble has
already rebounded to its pre-war price against the dollar.”
And while we would expect Russia to put a brave face on
its economic situation, it’s possible that its leaders mean it when they think
they’ll have largely adjusted to a post-sanctions world by the end of the year.
Prime Minister Mikhail Mishustin said last Thursday — roughly translated — “It’s a sin to
complain, we have done everything possible and impossible with the Ministry of
Finance this month. . . . So far, there are opportunities at the moment.
But it takes time for the economy to adjust. It is impossible not to have at
least half a year to reorganize in such a blow.”
In the end, if you bring economic sanctions to a
gunfight, it takes a long, long time for your weapons to seriously debilitate
the enemy. Russia’s hurt, but it’s enduring: “There
is no doubt that the financial and other sanctions have weakened the Russian
economy,” Patrick Honohan, a senior fellow at the Peterson Institute in
Washington and a former European Central Bank policymaker, wrote in a blog post
on Wednesday. “But the sanctions fall short of crippling the economy, as long
as they do not interrupt the flow of revenue from exports.”
The Biden administration has a bad habit of whistling
past the graveyard, insisting that everything is going swimmingly and according
to plan, while the evidence mounts that its efforts are a day late and a dollar
short. And no one in the administration is more guilty of insisting “all is well” than
President Biden himself: “There’s nobody suggesting there’s unchecked inflation
on the way — no serious economist.” “It
happens every single, solitary year: There is a significant increase in the
number of people coming to the border in the winter months of January,
February, March.” “I
trust the capacity of the Afghan military, who is better trained, better
equipped, and more re- — more competent in terms of conducting war.” “I’m
going to shut down the virus.” “I didn’t overpromise. I have probably
outperformed what anybody thought would happen.”
But as the war approaches its third month, there’s yet
another dispiriting disconnect between Biden’s tough talk — “The ruble almost
is immediately reduced to rubble,” “Russia’s economy is reeling,” “For God’s
sake, he cannot be allowed to stay in power” — and what the U.S. effort is
doing to Putin and his cronies. It is yet another case of this president
overpromising and under-delivering.
If the U.S. really wanted to hurt Putin, we would
announce that the United States, with our . . .
·
2 billion barrels of proven reserves of U.S. crude oil and
lease condensate;
·
3 trillion cubic feet of proven reserves of
natural gas;
·
535 million short
tons of coal (enough for the next 470 years at 2020 production);
·
284 million kilowatts
generated by renewable fuels, including 121 gigawatts from
solar power;
·
97 million kilowatts generated by nuclear power;
and
. . . is gearing up to replace Russia in the world energy
markets and undercut its prices. You don’t need sanctions compliance if you can
offer buyers a similar or better good at a lower price. And this policy move
would even be better for the environment, since Russia’s
oil and natural gas has higher methane emissions than U.S.-produced oil and
natural gas.
Russia’s Kinda-Sorta Genocide
Separately, the administration seems a little too
comfortable walking its current tightrope of “what Russia is doing might be
considered genocide, it might not, but either way, it’s really bad.” Here was
Sullivan, speaking on ABC News yesterday:
SULLIVAN: We haven’t yet reached a
determination on genocide. That is a determination that we work through
systematically. There is a unit at the State Department that gathers evidence
and then makes a legal analysis because genocide is actually a legal
determination.
But let’s set legalities aside for
a minute, Jon. I think we can all say that these are mass atrocities. These are
war crimes. These are shocking and brutal acts that are completely
unacceptable, beyond the pale for the international community. So whatever
label one wants to affix to them, the bottom line is this, there must be
accountability. And the United States will work with the international
community to make sure there’s accountability.
Based on recent history, that “legal determination” could
take a long while. On March 21, 2022, “following a rigorous factual and
legal analysis,” the U.S. State Department and Secretary Antony Blinken
“determined that members of the Burmese military committed genocide and crimes
against humanity against Rohingya.” The killing occurred in 2016 and 2017.
What is the point of a genocide-detection-and-denunciation
process that takes more than five years to work?
How much of the “we can’t call it a genocide yet”
argument reflects the fact that if the U.S. announces that, “Yes, this is an
ongoing genocide,” then the world and the American people are likely to demand
that the U.S. intervene militarily?
China’s ‘Zero Covid’ Approach Finally Collapses
Meanwhile, in
case you missed it yesterday, the Chinese government’s policies to control
the spread of Covid-19 are on the verge of causing mass starvation in the
country’s richest city, Shanghai. It is jaw-droppingly horrific; for about two
years — and long after the virus spread out of Wuhan — Beijing treated a virus
that is bad but manageable with good vaccines or previous infection as if it
was airborne Ebola, locking down whole neighborhoods or cities at the first
sign of a positive test. Now, the much more contagious Omicron variant is in
the country’s cities, and the “zero Covid” approach simply cannot work.
After several weeks of keeping the city’s citizens locked
in, Chinese
authorities are loosening the restrictions slightly: “Shanghai has classed
residential units into three risk categories, to allow those in areas without
positive cases for a stretch of two weeks to engage in ‘appropriate activity’
in their neighborhoods, city official Gu Honghui said.”
The problem is, with roughly 25,000 new cases being
reported each day, just how many “areas without positive cases for a stretch of
two weeks” are there?
And as for my allegedly unreasonable skepticism about the
plausibility of China’s official Covid-19 figures, how likely is it that
Shanghai has 130,000 cases but
only one case of severe illness?
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