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A month ago the Russian army started its war against Ukraine. Europeans and Americans have retaliated with massive economic sanctions and they are today preparing to increase the pressure against Vladimir Putin, when they meet in Brussels. But these reprisals also do a lot of collateral damage.
Russia is a large country with an underdeveloped economy: its GDP barely exceeds that of Spain. The sanctions were to quickly weaken it without causing too much harm outside its borders. But they are proving painful for the rest of the world: the price of oil and cereals is soaring because Russia is a major exporter of these two essential raw materials. Just like sunflower oil, fertilizer or aluminum and nickel.
The Twenty-Seven therefore intend to persevere in the economic response, but by mitigating as much as possible the negative consequences on their economy and on world food markets. This is the purpose of the summit to be held this Thursday, March 24 in Brussels in the presence of US President Joe Biden.
A ridge line difficult to hold for hydrocarbons
The embargo on Russian oil continues to divide the Twenty-Seven. The Netherlands think this is premature: European refineries could run out of raw materials in the event of an immediate embargo. Germany is also opposed to this option; Chancellor Olaf Scholz warns that such a measure could plunge the eurozone into recession. His country is particularly dependent on Russian gas, but also on Russian coal and oil.
On the other hand, a country that is also very dependent, Slovakia, is in favor of it, recalling that Russian oil revenues are financing the war in Ukraine. The debates therefore promise to be stormy between the 27, and if the principle seems acquired, the implementation and the timetable will undoubtedly be the subject of multiple negotiations. The sanctions will be triggered only if the 27 find alternatives for the most exposed countries. To escape Russian dependence, the 27 will also pool their gas purchases, like what they have been able to do for anti-Covid vaccines.
Europe also plans to protect consumers against excessive gas and electricity prices
On March 23, the European Commission proposed several lines of work. There is no question of going back on the organization of these markets, but a public entity could supply electricity and gas at low prices. In addition, the companies most penalized by the sanctions regime will be able to benefit from a fund of 400 million euros made available to them.
Finally, the Commission validates the relaxation of the rules of the CAP: land left fallow to promote biodiversity as recommended by the CAP can be cultivated, the objective being to produce more to reduce pressure on food markets and need to export to countries traditionally supplied by Russia or Ukraine.
Is this enough to protect European economies?
Difficult to answer when there is a lack of visibility on the duration and the outcome of the war which conditions the sanctions regime. If Vladimir Putin settles into a war of attrition or if he destroys Ukraine, which seems to be his current goal, the West will have no reason to lift the sanctions. They could last for years and upset the food and energy supply of the entire planet.