Russia Energy Ban Myth Buster

Frequent arguments against taking action now, and why they don’t stack up -- by @lukaszrachel

Original version: https://t.co/L26ZGfX9IK

MYTH 1: We are not financing Putin’s war (b/c of sanctions, he cannot use the billions of euros/dollars we send him anyway)

FALSE: there’s no doubt that a ban would drastically limit the real resources available for war. Existing sanctions are inherently leaky. They limit the availability of the stock of Russia’s reserves, but the flow of energy revenues on the order of 700 million euros per day is more than enough to hire mercenaries, buy weapons and destabilize EU politics. Over 40% of Putin’s budget revenues derive from energy exports - without this income, enormous cuts to public spending across the board will be required. Printing rubles does not help: without the backing of the real resources obtained through energy exports, the empty rubles would fuel (hyper)inflation and an economic collapse. Currently, forex revenues are sold to support the ruble (which has appreciated most recently), limiting the impact domestically. So yes, there is no escaping it: our energy purchases are directly funding Putin’s war machine. See numbers here and more analysis here and here. See also top Russian economists – the most informed voices on these issues on the planet -- forcefully argue that the energy ban is our best chance to stop the war early (in German here).

MYTH 2: Russia can sell oil & gas to China and elsewhere, so we’d only be hurting ourselves.

FALSE: : a complete substitution towards China is infeasible given the scale of European imports: we buy 49% of Russian oil and 74% of Russian gas. And if China becomes nearly the sole buyer, it will bargain hard, limiting the revenue flows. Ultimately, if Putin did not need our money, he would have turned off the tap alrea