- given the lack of complete sanctions on Russian energy, Professor Chadha also noted that high oil and gas prices “[ … ] in foreign exchange terms has provided the Russian economy with a large hedge”.[1]
- Mr Shearing described the sanctions on the Russian Central Bank as “unprecedented for a G20 economy” and said that “they are principally what is causing the economic pain right now”.[2]
- Dr Amrita Sen, Director of Research at Energy Aspects, described the effect of denial
of Russian access to SWIFT on firms’ behaviour:
Pretty much overnight, even if you take self-sanctioning out of the picture, companies really struggled, because SWIFT is the easiest way for payment. You immediately saw companies backing out and saying, “We are no longer going to deal with Russia”.[3]
- The Government observes that Russian oil exports are being harmed by self-sanctions
that are not specific to oil and gas production:
Russian oil is already being ostracised by the market, with nearly 70% of Russian oil currently struggling to find a buyer, and in a competitive global market demand will quickly be met by alternative suppliers.[4]
- Dr Sen agreed that Russia’s ability to export oil and gas is already being harmed
by existing technology sanctions and self-sanctions by companies leaving the Russian
market. She told us that even though Western technology could be replaced by China or
India, “the technology is just not the same [and would mean Russia] will only be able to get
maybe 60% to 70%”[5] of the full yield from its oil compared to using Western technology.
Dr Sen also explained that Russian production is likely to be hampered by the economic
sanctions imposed. She said:
Russian production depends heavily on tax breaks given by the Government. These sanctions are crippling for the economy. Our economists think you could get Russian GDP going down by 20%, potentially. I know their official forecast is for 8%. There is no way that the Government will have money for tax breaks, which is what is required to produce in some of these more difficult areas. We absolutely think that, in the longer term, Russian production is crippled. Oil production is about 11 million barrels per day. Maybe it will struggle to get above 8 million or 9 million, even with Chinese and Indian help.[6]
- Russia may also be impacted by the EU’s announcement on the 8 March 2022 of its REPowerEU: Joint European action for more affordable, secure and sustainable energy plan outline, which aims to “reduce EU demand for Russian gas by two thirds before the end of the year.” The plan also suggests that “phasing out our [the EU’s] dependence on fossil
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Defeating Putin: the development, implementation and impact of economic sanctions on Russia
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