Despite economic sanctions imposed by the United States and the West, we now learn that Russia's cash flows soared during the first quarter because of surging energy prices for Russian oil and gas — ironically, brought on by Russia’s attack on Ukraine. Russia's continued sales of oil and gas to the West are the single most important thing now propping up Putin’s brutal regime.
The Institute of International Finance projects that Russia will post a record $250 billion surplus this year based on its first-quarter sales of oil and gas, which would entirely make up for the Russian central bank reserves now frozen by Western powers through sanctions. In short, sales of oil and gas are giving Putin the money he needs to finance his savage war.
Russia's ruble has more than fully recovered. True, imports into the country have fallen sharply, reducing the standard of living of Russians who are unable to buy foreign goods. But via lies and propaganda, Putin has rallied Russians behind him nonetheless.
It’s now clear: The only way the United States and the West can impose real pain on Putin is to stop purchasing Russian oil and gas entirely. This would be costly for us, of course. We don’t know exactly how costly but there’s no question such a move would drive world energy prices substantially higher.
So today’s Office Hours question: Is it time for the United States and the West to make this sacrifice for Ukraine? Please leave your comments below. I’ll chime in as well.
Thank you once again for your thoughtful comments. My take: If stopping Putin’s slaughter of innocent citizens in Ukraine requires that the West stop buying Russian old and gas, then we have a moral obligation to do so.
It’s also in our own interest. If Putin is victorious in Ukraine, all other nations bordering Russia, whether NATO members or not (Finland, Sweden, and Japan, for example) would be endangered. And we would have been complicit in cowing to a strongman who is contemptuous of democracy and the rule of law -- and encouraging other similar strongmen around the world (including our homegrown Donald Trump).
The third reason we must stop oil and gas purchases is that our planet is only one small step away from destruction by CO2 emissions. We should use this crisis to permanently wean ourselves off oil and gas, and shift to renewable sources of energy.
But what about the costs? I suggest we remind ourselves of how we dealt with the sacrifices entailed in World War 2. Then, we rationed scarce supplies. It wasn’t a perfect system, but it did spread the sacrifices over many, regardless of wealth. We also used price controls. And we encouraged countless small ways to save money, such as “victory gardens.”
The point is we are in two wars right now, both embodied by Russian oil and gas – a war to preserve democracy and liberty, and a war to save the planet. Either would justify much sacrifice to win. Together, they represent a great moral and political test of our time.
Office Hours: Is it time to make a big sacrifice for Ukraine?