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Given the pro-Russian leanings of many of Europe’s populist parties, it is perhaps unsurprising that they prefer to parrot the Kremlin’s talking points. These include calling for an end to Western sanctions against Moscow, as many European parties from the far right to the far left have recently called for.
Given the pro-Russian leanings of many of Europe’s populist parties, it is perhaps unsurprising that they prefer to parrot the Kremlin’s talking points. These include calling for an end to Western sanctions against Moscow, as many European parties from the far right to the far left have recently called for.
The usual story behind demands for sanctions against Russia to be lifted is basic. France’s National Rally, Germany’s Alternative for Germany, and Hungarian Prime Minister Viktor Orbán all say sanctions are backfiring and hurting Europe’s economy, but not Russia. claims. Such rhetoric will gain increasing traction as populist parties across the European Union prepare for European Parliament elections in June. Therefore, it is time to debunk these false claims.
The most popular talking point for pro-Russian politicians is that sanctions are ruining European businesses and consumers. The most widespread of these claims, and the easiest to disprove, is that sanctions are causing European energy prices (and inflation) to rise. It was Russia’s attack on Ukraine and gas threats against Europe that caused a spike in global hydrocarbon prices in early 2022. It was only in November of the same year, when oil and gas prices were already falling, that Western countries began imposing sanctions on Russian energy exports.
Another argument is that sanctions are penalizing EU export-oriented companies that have lost access to the Russian market. But the reality is probably more benign. Russia is by no means a major market for EU companies, with Russian companies buying just 4% of EU exports in 2021. Considering that around half of EU exports to Russia are subject to sanctions, this means: Only 2% of her EU exports will be affected, not a make-or-break figure.
Country-level data from the French research center Center d’Etudes Prospectives et d’Informations Internationales supports this assessment. This shows that the impact of sanctions against Russia on the French economy is almost negligible, affecting only 0.8% of French exports, or about 4 billion euros (about $4.4 billion). This corresponds to her around 0.1% of France’s GDP. Although this study only covers France, these findings are probably not significantly different in other EU countries. Along with German companies, French companies were among the European companies with the deepest ties to Russia. This suggests that companies in many other European countries are even less affected.
Another interpretation of the pro-Kremlin argument that sanctions are crushing Europe’s economy is based on the idea that EU companies have been forced to abandon investments in Russia because of sanctions.of financial timesFor example, it is estimated that between the start of the full-scale invasion of Ukraine and August 2023, European companies recorded losses of around 100 billion euros ($109.4 billion) from their Russian operations.
While this number may be accurate, the idea that it has much to do with sanctions does not stand up to scrutiny. At this stage, sanctions do not prevent European companies from doing business in Russia, except in some specific sectors such as defense. Rather, there are two other causes of losses for European companies in Russia. The first is that many companies are opting to retreat, either out of fear of reputational risk or because they don’t want to pay Russian taxes and join Moscow’s war effort.
A second cause of losses is a surge in asset seizures, with the Kremlin forcing many European companies to sell assets for less than their value, in some cases for as little as one ruble. In other words, even in a hypothetical world without sanctions, European companies that once bet on the Russian market would now face massive losses. Of course, the Kremlin insists that expropriation is only a means of retaliating against sanctions. This sentence is just another item in a long list of Moscow’s false claims that it is only trying to protect itself from Western aggression.
Another argument favored by European populist politicians is that European sanctions against Russian energy are not only costly (a false claim, as we have seen), but also wasteful. . There are several explanations for this myth, but the most well-known one is that the EU oil embargo and the oil price cap agreed by the G7 and EU member states have meant that Russian oil producers have been unable to transport oil. The route was able to be changed to India, so there would be no impact. .
In fact, Indian refiners are now absorbing the bulk of crude oil exports from Russia’s Baltic ports, which previously served Europe. But this view masks the fact that for Russia, selling oil to Indian refiners is much less profitable than selling to Europe. The sea route to India is much longer (and therefore more expensive) than the sea route to Europe. Additionally, Indian buyers can facilitate deals. They are entitled to deep discounts on Russian oil because they believe they are doing the Kremlin a favor by compensating for losses in the European market.
According to a study by the Kiev School of Economics, the damage to Russia cannot be ignored. Over the past two years, the Kremlin has lost an estimated $113 billion in oil export revenue, largely due to his EU embargo on Russian oil. Last year, when both the EU embargo and the G7/EU oil price cap took full effect, Russia’s overall trade surplus fell by 63 percent to $118 billion, constraining the Kremlin’s financial resources to wage the Ukraine war. It was done.
This year may not be any better for Russian oil exporters. Last month, the Kremlin announced that oil companies would have to give up some of their profits to compensate the state for reduced export revenues. For Russian oil company Rosneft and others, this is the first time that the Russian government has requested direct assistance from a domestic energy company to finance a war.
As enforcement of sanctions intensifies, the idea that sanctions are meaningless will further diminish. Since October, the U.S. has imposed sanctions on 27 tankers that were transporting Russian crude to circumvent G7/EU oil price caps, making it difficult for companies based in either bloc to It is illegal to do business with tankers. This highlights a dramatic shift in Western countries’ interpretation of sanctions. Until recently, price caps only applied when G7 or EU-based shipping or insurance companies were involved in transporting Russian oil. Washington is now interpreting its ties to Western companies more broadly.
For example, Liberian-flagged tankers, which make up a significant portion of Russia’s ghost fleet, are currently tied to oil price caps because Liberia outsources flagging operations to U.S.-based companies. In parallel, Western countries are increasing pressure on Indian refiners to wean them off supplies from Russia. Unfortunately for the Kremlin, these efforts appear to be working. Since the beginning of this year, India’s imports of Russian crude oil have gradually declined by about a third from their peak in May 2023.
The populist argument that sanctions harm Europe more than it harms Russia does not stand up to scrutiny. In reality, these measures will have a small impact on European companies, but Russia faces increasing headwinds as it seeks to divert oil from Europe.
The claim that sanctions are costly and ineffective is easily debunked, but this theory is not likely to disappear any time soon. These issues are expected to become more prevalent in the coming weeks as pro-Russian politicians step up their campaign in the European Parliament and other elections. This may be another sign that these myths are wrong. If sanctions had not had such a severe impact on Russia, the Kremlin and its Western allies probably would not have spent so much energy trying to undermine them.
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