Benjamin Hilgenstock (Kyiv School of Economics Institute) - What Effects Have Energy Sanctions Had on Russia's Ability to Wage War?

BOFIT seminars

BOFIT Seminar - Benjamin Hilgenstock (Kyiv School of Economics Institute) - What Effects Have Energy Sanctions Had on Russia's Ability to Wage War?

Abstract
Since Russia's full-scale invasion of Ukraine, countries of the so-called 'sanctions coalition' have imposed wide-ranging restrictions on Russian fossil fuel exports, which are of critical importance for macroeconomic stability and the budget. While these measures have had a noticeable impact, Russia has clearly retained the ability to continue -- and pay for -- its war of aggression. In fact it continues to earn hundreds of billions from oil and gas every year. This poses the question why energy sanctions have not had the desired effect. Several factors contribute to this: deliberate loopholes in the sanctions regime, which allow Russian oil and gas to continue to flow to Europe; a general hesitancy to tackle the volume of Russian exports and risk higher energy prices, which has been the key driver behind the creation of the G7+ oil price cap; and fundamental flaws in the way in which sanctions are imposed and implemented -- such as the price cap, whose leverage has been diminished by the shadow fleet and which is largely unenforceable. The seminar will delve deeper into these topics and try to show a path forward to step up economic pressure on Russia.

 

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