Will the Obama Administration’s sanctions against Russia do anything to affect President Vladimir Putin’s geopolitical calculus? Forget about it.
China just signed a $400 billion deal to buy Russian natural gas for the next 30 years, providing Beijing with a more secure line of clean energy and Moscow a much-needed economic and diplomatic boost, according to ForeignPolicy.com.
However, the new pact also provides Putin with another crucial win. Russia can now sidestep the U.S. and European sanctions aimed at punishing him for his seizure of the Crimean peninsula and his efforts to foster unrest in Ukraine.
Essentially, the natural gas deal between Russia and China renders our attempts to impose economic sanctions against Russia toothless.
In regards to the recent energy deal between China and Russia, Zachary Goldman, the former Treasury Department sanctions official said, “I don’t think this inhibits the ability of the U.S. and its partners to impose sanctions in the short term, but I do think it could affect the ultimate price those sanctions would exact in the medium term,” according to ForeignPolicy.com.
With the stroke of a pen, Russia has dramatically expanded its sources of foreign direct investment eastward, while minimizing its reliance on Western energy consumers.
Since Europe obtains about 30 percent of its gas from Russia through pipelines in Ukraine, Russia’s nefarious actions in Ukraine have provided the impetus for Europe to start looking elsewhere for energy, according to the New Yorker. Russia derives
roughly half of its budget from energy revenues and Europe accounts for roughly 75 percent of Russia’s export market, according to Stratfor and ForeignPolicy.com; thus, Europe’s plans to rely less on Russian energy sources have deeply worried Moscow.
After Putin’s seizure of the Crimean peninsula, Russia’s economy tanked and investors ran for the hills. According to Forbes, about $63.7 billion left Russia in the first quarter of this year alone. Moreover, the International Monetary Fund expects
capital flight in Russia to exceed $100 billion by the end of the year. Thus, Russia seriously needed an injection of foreign capital to offset the capital flight.
Since China’s reliance on coal has produced major pollution problems, Beijing has started to recognize the need to use cleaner energy sources to fuel China’s booming economy.
As a result of Russia’s capital flight, Europe’s calls to minimize its reliance on Russian energy, and China’s desperate need for cleaner sources of energy, Russia and China’s recent marriage was a match made in heaven.
So far, the sanctions against Russia have been more symbolic than punishing. In an effort to drive a wedge between Putin and his closest allies, the Obama administration has frozen the assets of 45 prominent Russian oligarchs, according to
Forbes. Additionally, the U.S. has frozen the assets of 19 banks and companies.
Notably lacking in these sanctions is the Russian energy giant Gazprom, which accounts for 78 percent of the country’s national natural gas output and 25 percent of Europe’s imported natural gas from Russia, according to the American Enterprise
Institute.
In sum, our sanctions will do nothing to curb Putin’s treatment of the international arena like a zero-sum chess match. The colossal energy deal between China and Russia will only embolden Putin, providing Moscow with a much-needed
injection of capital and a substitute for Western consumption of Russian energy.
Thus, Putin will continue to flex his muscles while exploiting the anarchic structure of the international arena without regard for our current sanctions.