After recognising the independence of separatist-held Ukrainian regions of Donetsk and Luhansk, Russia launched a full-scale invasion of Ukraine. Following a massive Russian troops’ build-up along the borders with Ukraine and the denial of full-scale military action, Kremlin has brought war back to Europe. “Russia has manufactured this crisis and is responsible for the current escalation,” said Ursula von der Leyen, president of the European Commission, in response to Russia’s ongoing invasion of Ukraine.
In the first tranche of sanctions, the European Union (EU) has targeted the Russian banking market, energy sector, access to crucial technology and visas among other things. The bloc has vowed to impose ‘harshest’ sanctions on the perpetrator. But ‘what is impeding a tough response from the EU?’ — is the critical question.
The EU’s structural energy dependency on Russia complicates any smooth rollout of a strong response against Moscow. The bloc relies heavily on Russia for meeting its soaring energy security needs at home. Russia remains the largest natural gas and petroleum oil supplier to the bloc. The EU meets around 45 per cent of its natural gas demand and around 25 per cent of petroleum oil demand from its imports from Russia. The collateral cost that the EU would face by imposing sanctions on Russia remains unknown and massive at the same time.
Further, it is worth noting that energy products constitute the backbone of the Russian export basket and thus, its economy. The EU’s economic response concerning the energy sector is crucial as the bloc remains Russia’s largest export destination for energy products and fuels as well as its biggest trading partner. Therefore, the EU has attempted to hit the bear where it would hurt the most by announcing to impose energy sanctions. But, any calculus that involves imposing economic sanctions on Russia will cost the bloc dearly as Moscow is expected to retaliate by decreasing the supply of energy products to the EU. The forthcoming Russian retaliation would hurt the bloc’s economy more than that of the US and the UK, considering the larger extent of the EU-Russia trade relations.
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Germany, the largest economy in the EU, has announced suspension of the regulatory certification process for the controversial Nord Stream 2 pipeline. The pipeline, running under the Baltic Sea between Russia and Germany, can transport around 55 billion cubic meters of gas per year. Thus, it carries the capacity to ease the rising energy demand and prices in the EU at the domestic level. But far from being receptive about its implementation, the West, which includes the EU member-states, was divided on the Nord Stream 2 issue. Countries like the US, Poland and even Ukraine saw the pipeline as a potential political tool that Kremlin could use against the EU in times of crisis. Berlin’s step to halt the certification process of the pipeline has blurred the divisions between the western allies on the functioning of the pipeline, for the time being.
The EU has emphasised the West’s unity in responding to the Russian military misadventures in its neighbourhood, including coordinated sanctions on Russia. But reports of German, Italian and Hungarian reluctance to cut off Russia from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) international payment system has diluted the harshness of the sanctions threat against Russia. If such a measure forms a part of the western coordinated sanctions, Russia’s ability to carry out international trade would be severely impaired. The case of certain Iranian banks that faced removal from the SWIFT in 2012 deserves consideration in this regard. Such financial isolation, at the behest of the EU, had sharply reduced Iran’s oil exports and affected its economy. But, the question of Russia’s expulsion from the SWIFT system has made fissures visible in the EU’s approach to sanctioning Russia.
The French presidency of the Council of European Union has pushed for attaining strategic autonomy for the bloc. But what remains missing are talks and a roadmap for attaining the same in the energy security sector. The bloc’s energy dependency on Russia has soared even after its relations with a militarily assertive Russia have been plunging. The EU has been imposing progressive sanctions on Russia since the latter annexed Crimea in 2014. But such measures have not deterred Kremlin to undertake further military misadventures in its European neighbourhood. Moreover, they have not dissuaded Kremlin from demanding a renewed European security architecture where its security interests would be accommodated. The effectiveness of the western coordinated sanctions is yet to be materialised as Russia’s invasion of Ukraine continues.
Jayesh Khatu is a doctoral candidate and a UGC Junior Research Fellow at the Centre for European Studies, School of International Studies, Jawaharlal Nehru University. He tweets @jayeshkhatu. The views expressed in this article are those of the author and do not represent the stand of this publication.
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