Current demand and supply dynamics mean that a punitive tax on Russian oil would be both costly for Russia and beneficial for the rest of the world, making it more credible and sustainable than an embargo. The idea deserves far more attention than it has received.
CAMBRIDGE – As I write, the Russian army has entered the Ukrainian capital, Kiev. It is now clear that the threat of sanctions has not deterred Russian President Vladimir Putin from launching his invasion. But dealing with the threat can still play two other roles: sanctions can limit Russia’s ability to project power by weakening its economy, and they can set a precedent that could influence Putin’s future behavior vis-à-vis other countries like Georgia, Moldova. , and the Baltic States.
One of the reasons why the threat of sanctions might not have prevented the war is that Russia did not consider them credible. If imposing a sanction is costly, the political will to do so may be weak or evaporate over time. For example, Western consumers are already frustrated by high energy costs. A Russian oil embargo will reduce global energy supplies and push prices even higher, potentially triggering a backlash against the policy.
This may be the reason why Western countries have not imposed it, opting instead for financial sanctions which have, so far, been disappointing. After all, arguably the most significant sanction to date – the suspension of the Nord Stream 2 gas pipeline that would have delivered Russian natural gas directly to Germany – will put a strain on the already strained European natural gas market.
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