DANIEL VAUGHAN: Europe sanctions Russia and foots the bill

At the beginning of April, news reports emerged of a massacre in Bucha, Ukraine. Those reports showed signs of Russians executing men, women, and children. Western intelligence agencies indicated that far worse was possible as well. At the time, I wrote that while those reports were awful, it was unlikely to lead to change.

Now, at the end of the month, we find out Europe has no response to Bucha. Reuters reports that the European Commission has given its blessing to a plan for European countries to purchase Russian oil. As I wrote several weeks ago, Russia tried to force European countries to buy Russian oil with rubles. Putin is trying to force Europe to pay for its sanctions against Russia. The deadline for that decision is the end of April.

The European Commission said, “EU companies may be able to work around Russia’s demand to receive gas payments in roubles without breaching sanctions if they pay in euros or dollars which are then converted into the Russian currency.” They added, “The companies would also need to seek additional conditions on the transactions, such as a statement that they consider their contractual obligations complete once they have deposited the non-Russian currencies.”

Europe wants a technicality.

Why is this a workaround? The Commission explained, “Moscow’s decree does not necessarily prevent a payment process that would comply with EU sanctions against Russia over the Ukraine conflict, the Commission said.”

It’s a technicality. Russia is still getting paid, the Europeans get their oil, and the Grand Canyon-sized exemption in sanctions is allowed to continue. Europeans can hang their hat on the fact that they’re not technically paying in straight rubles, just converting another currency into rubles.

That fact ignores the reality that European money flows into Moscow’s coffers. Putin can use that money to fund his war in Ukraine or rebuild the Russian military. For all the grand rhetoric of war crimes, solidarity with Ukraine, and more, the West is still funding its sanctions against Russia.

Europe is taking some action. Seeking Alpha points to some other commodities. “The EU has proposed banning both Russian coal and Russian oil imports in coming months; however, the concession on currency payments likely points to continued Russian gas flows for the duration of 2022.”

Europe needs Russia.

The central problem is the same as ever: Europe is not energy independent. Some countries like France or the United Kingdom have a long-term vision and have strong nuclear or non-Russian reliant energy sectors. But when you look at countries like Germany or east Europe in general, the Russian reliance is firm.

That’s not to say Russia is skating by without any impact. The West’s sanctions are strong, and Putin knows it. The Wall Street Journal reports that Russia is moving to block access to economic data out of Russia.

The growing blackout is part of an effort by the Russian authorities to protect the economy and domestic companies from further sanctions by the West following Moscow’s invasion of Ukraine. Limited data means that Washington and Brussels will have less visibility on whether and how their sanctions are biting into the Russian economy, making it more challenging to find new targets and fine-tune future sanctions rounds.

Most notable here is oil. “Last week, a branch of the Russian energy ministry that releases monthly oil production and export data said it was limiting ‘the dissemination of information that can be used as additional pressure on the Russian market and its participants,’ according to Russian state newswire TASS.”

The contradictions remain.

The data will make it harder to tell whether or not sanctions are working. By itself, that is a sign that sanctions are hurting Russia. But withholding data on oil has another side; we won’t know where Russia is sending its oil outside Russia.

Reports from NPR and others reveal that Russia is getting oil to other countries, Europe included, by simply changing the name on the barrels. That should tell you how deep the commitment of Europe comes to stopping Russia in this war. Some of these European countries are willing to turn a blind eye to Russia slapping a different label on the outside.

Again, the contradictions are still there for all the talk of Bucha and other atrocities. Rhetoric is one thing. Taking action that would deplete Russia’s capacity to wage war is another. Europe would rather sit comfortably, telling itself that it’s a green, environmentally friendly society rather than attack a geopolitical foe.

These contradictions cannot last forever. Europe cannot continue sending arms and supplies to one side while funding the war from the other. Technicalities on rubles continue the great sham of these sanctions.