Hypocrisy of West? Critics Feel Tough Sanctions on Russia Nothing But 'Capitalism in Times of War'

Amid several western countries announcing sanctions on Russia for invading Ukraine, numerous media reports have highlighted western hypocrisy behind it and critics of the invasion noted that sanctions imposed by the United States, Britain, European Union among others do not, in fact, target areas such as energy purchase, banking and international payments system SWIFT.

Russia’s attack on Ukraine is being called the biggest attack on a European state since World War II, prompting tens of thousands to flee. Sanctions include measures aimed at impeding Russia’s ability to do business in major currencies along with sanctions against banks and state-owned enterprises. Japan, Canada and Australia are also among those who have unveiled sanctions, including a move by Germany to halt certification of an $11-billion Russian gas pipeline.

But, the US sanctions and penalties announced so far appear to spare Russian President Vladimir Putin. Also, US President Joe Biden said the sanctions were “tailored” not to disrupt global oil and natural gas markets. “Our sanctions package is specifically designed to allow energy payments to continue,” Biden said in his White House address on the first day of the invasion on Thursday.

Russia is the world’s second-largest crude producer and a major natural gas provider to Europe. Germany and other US allies are heavily dependent on its shipments despite the strong progress some are making in moving away from fossil fuels. The Biden administration has stressed the care it is taking to minimise impact on allies.

This was highlighted by Brussels bureau chief of The Economist, Stanley Pignal, who tweeted: “The only thing to note in the sanctions situation is that Russia is still sending gas to Europe, and Europe is still sending $$$ to Russia. The structure of what was done and not done on sanctions (on banks, SWIFT, etc) is designed to reflect this reality.”

Pignal has tweeted a whole thread on how EU had earlier dismissed its needs for Russian gas. “A week ago, European Commission president Ursula von der Leyen told the Munich Security Conference that Europe didn’t need Russian gas. “Today I can say that even in case of full disruption of gas supply by Russia we are on the safe side for this winter.””, tweeted Pignal, showcasing how the sanctions imposed on Russia now tell a different story.

Calling it “capitalism in times of war”, energy and commodities columnist for Bloomberg, Javier Blas highlighted a report on how Europe was buying more Russian natural gas, through Ukraine, even after the invasion. He said the exercise was “all about making money”.

Signalling the energy purchase conundrum, oil prices, too, slipped after a sharp rise over concern over potential global supply disruptions from sanctions on major crude exporter Russia. On Thursday, the invasion sent prices above $100 a barrel for the first time since 2014.

“European and US politicians, so far, seem to refrain from hitting Russia with sanctions connected to energy because it would hurt Europe just as much if not even more than Russia,” said SEB analyst Bjarne Schieldrop.

According to report by Bloomberg, the immediate response by European energy companies in the hours after Ukraine’s invasion was to buy more natural gas from Russia, much of it transported through Ukraine’s pipeline network.

Russian gas supplies through Ukraine jumped almost 38 per cent on Thursday and are expected to increase further by about 24 per cent, according to data from Ukraine’s grid operator, as per the report. “I think gas will continue to flow to Europe via all export corridors, including the Ukrainian one as long as no pipelines get damaged,” the report quoted Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies.

If nothing else, the invasion has highlighted dependence on the Russia’s energy supplies. State-run Gazprom generates billions in revenue every year as a third of gas demand is met through pipelines from Siberian gas fields.

‘Selling Gucci loafers more of a priority’

Not only this, according to the Brussels correspondent of The Telegraph, Joe Barnes, Italy and Belgium had both managed to successfully keep luxury goods and diamond industry out of the sanctions imposed. Barnes tweeted: “Italian prime minister Mario Draghi successfully secured a carve out for Italian luxury goods from the EU’s package of economic sanctions against Nato (later corrected to Moscow), EU dip tells me. ‘Apparently selling Gucci loafers to oligarchs is more of a priority than hitting back at Putin,’ source adds.”

He also tweeted: “Belgium’s diamond industry is also not included in the package of sanctions, but wider point is Mario Draghi lobbied to ensure luxury goods were kept out, and is still lobbying to make sure they’re not included in future package of sanctions.”

Economic reckoning?

After all the political bashing, finance ministers of 19 countries using Euro gathered in Paris to weigh the economic fallout of the invasion and resulting sanctions.

The finance talks will be devoted exclusively to the Ukrainian question, to economic consequences and to what we can do to protect our economies, said French finance minister Bruno Le Maire in televised remarks.

While the EU’s 27 national leaders said the sanctions would impose massive and severe consequences on Russia, some acknowledged pain would be felt in Europe. “All these measures are going to be expensive, also for us,” said Luxembourg Prime Minister Xavier Bettel.

The EU is facing considerable costs because of close economic ties with Russia, particularly the blocs imports of Russian energy. BusinessEurope, which represents a range of EU-based companies, appealed to European authorities for supporting measures to ease the impact of the sanctions.

The EU is going beyond more targeted economic penalties introduced in 2014 after the Kremlin annexed the Ukrainian region of Crimea and began supporting separatist rebels in eastern Ukraine. Russia had then retaliated by banning imports of farm goods from the EU.

While those curbs remain, trade in goods between the EU and Russia is still sizable. It totalled more than 174 billion euros ($195 billion) in 2020, making Russia the EU’s fifth-biggest trade partner and the bloc the largest Russian commercial ally, according to the European Commission.

Of the roughly 95 billion euros in EU imports from Russia in 2020, when the economy slumped during the Covid-19 pandemic, around 67 billion euros or 71 per cent were petroleum products.

Even before the invasion, Europe was facing economic difficulty. Euro-area inflation hit a record 5.1 per cent in January, fuelled by surging energy prices. The European economy has entered a soft patch, reflecting other factors including the Omicron variant of Covid-19 and a shortage of semiconductors that are used in everything from cars to game consoles.

Holding back on SWIFT ban

When it comes banning Russia from SWIFT, an option that has long been cited as one of the toughest possible, Biden once again cited concerns by his European allies. SWIFT is the financial system that moves money around the world.

While German chancellor Olaf Scholz has openly expressed scepticism over banning Russia on SWIFT, British Prime Minister Boris Johnson has advocated the move. Biden, however, said his banking sanctions will hit Russia even harder than a SWIFT ban.

Road ahead

The EU, meanwhile, said it was preparing a third round of sanctions against Russia, shortly after Ukrainian President Volodymyr Zelenskiy lamented what he said was an insufficient reaction from Europe.

An EU official, speaking on condition of anonymity, said the third round would freeze European assets of Putin and Russian foreign minister Sergey Lavrov. “We are moving as quickly as we can,” said the official, adding the bloc could also target “many more” oligarchs.

The official said the third round would further eat into Russia’s financial and energy sectors but did not give details or say when these sanctions could be enacted.

(With agency inputs)

Read all the Latest News India and Breaking News here