New EU sanctions against Russia are delayed: why is this happening and how much do the restrictions affect the Russian economy?
Kyiv • UNN
The introduction of the 18th package of EU sanctions against Russia is delayed due to disagreements among allies. Hungary and Slovakia are blocking the restrictions, demanding guarantees of gas supplies, while the US is not rushing to lower the price cap on Russian oil.
The expansion of the EU's 18th package of sanctions against Russia has been put on hold due to political differences between allies. In particular, Hungary and Slovakia are blocking new restrictions, demanding guarantees for gas supplies. The US is also not rushing with radical steps, in particular, with lowering the price cap on Russian oil, citing the need to maintain space for dialogue. However, for a truly "killer" effect, more is needed - a complete disconnection of Russian banks from SWIFT and an energy embargo. Economic expert Oleh Pendzyn told UNN correspondent about this.
Despite expectations, the approval of the 18th package of sanctions against Russia is stalled due to disagreements in the EU. In particular, Hungary and Slovakia are wary of increasing pressure on Russia due to fears about energy. They are blocking the decision and putting forward energy demands: continuation of gas imports or transit compensation. Washington, in turn, also hopes for dialogue with Russia and is not in a hurry to introduce additional sanctions.
At the same time, the procedure for introducing a new package of sanctions requires unanimity. During the G7 meeting, the United States also did not confirm its readiness to lower the price of Russian oil from $60 to $45.
The new wave of sanctions should also include restrictions on "shadow fleets," another 22 banks, dozens of companies, and individuals, which could deal a significant blow to its economy, but are not yet critical.
Among the steps announced in the 18th package, the expert named the possible reduction of the oil price cap as the most powerful, although he added that the best solution for Ukraine would be a full embargo on Russian energy resources.
Here they need to be supplemented by a complete disconnection of all Russian banks from the SWIFT payment system. Well, the most important thing is the prohibition or very significant restriction on the sale of Russian energy resources, gas and oil. Because gas and oil bring Russia its main revenues
At the same time, Pendzyn noted that even a reduction in oil prices will significantly affect the Russian economy and called this step "the most effective among the methods in the EU's 18th package of sanctions."
If the maximum price for Russian oil was reduced from 60 dollars to 45, it would make oil production and transportation unprofitable in Russia itself. That is, their cost of production plus transportation to the main supply countries, and these are China and India today, costs more than 45 dollars. That is, if the price of Russian oil is reduced to 45, it makes their entire oil and gas complex simply unprofitable
However, not all allies are excited about the price reduction. On this issue, "there is some ambiguous attitude from the US and even some European politicians have expressed fears." They cite "escalation of the conflict" and an attempt to leave room for dialogue as the reason for such fear, but for Ukraine, where "escalation occurs every day due to Russia deliberately hitting civilian residential targets," this attempt to slow down sanctions is costly.
I hope that the last NATO meeting and what has already happened in Iran will nonetheless shift the US foreign policy vector to the Russian-Ukrainian war and, perhaps, lead to tougher actions against the aggressor country, Russia
Pendzyn also emphasized that the fall in the price of Russian energy resources, along with the increase in the number of shadow fleet vessels targeted by sanctions, would collectively inflict significant damage on Russia. The point is, as the expert reported, that Russia has practically exhausted its last reserve fund, the so-called "national welfare" fund.
"Today, the liquid part of this fund is estimated at 2.3 trillion rubles. At the same time, Russia's budget deficit increased from 1.2 to 3.8 trillion rubles. That is, they are already short of 1.5 trillion rubles to even cover their current budget deficit for 25 years. Well, and their deficit is growing from month to month because their war expenditures are growing," stressed Pendzyn.
Given that Russia, according to the expert, is not going to reduce the intensity of military operations, but rather increase it, this could lead to significant "holes" in the Russian budget already in the next 3 months.
If they continue at this intensity, then in just a quarter, with the current dynamics of their income and expenses, they will feel a very serious lack of opportunities to finance the war at its current intensity.
He added that Ukrainian partners in Europe and the United States must eventually come to an understanding that "we should not negotiate with Russia, but Russia must be defeated on the battlefield, and for this, we simply need to help Ukraine with weapons." At the same time, sanction pressure is also needed, but it must be as powerful as possible.
As of today, according to what was announced in the 18th package of EU sanctions, this can be called another element of additional pressure on the Russian economy, but so far it is not yet lethal
Supplement
Polish Minister for European Affairs Adam Szlapka downplayed the prospect of a full agreement at the EU summit when asked about the new EU sanctions package against Russia and defense funding. Asked whether he thought there was support at the EU summit for a compromise on difficult issues such as defense funding and the 18th sanctions package against Russia, he "did not express the optimism expressed by others in the EU Council."
Meanwhile, Sweden's Minister for European Affairs Jessika Roswall said that while she had "high hopes" for a sanctions agreement.
Slovakia, which depends on Russian gas, has consistently opposed the latest sanctions package, joining forces with neighboring Hungary to delay these measures.