Stiff tariffs on Russian energy would lower demand for its hydrocarbons—and cut the European funds fuelling Vladimir Putin’s war machine
Save time by listening to our audio articles as you multitaskBanners in demonstrations from Paris to Prague have advocated simply shutting off the pipeline and turning away tankers carrying Russian crude. Yet wave upon wave of European sanctions have all but ignored oil and gas, even as drastic measures targeting other bits of the Russian economy have been adopted.
The aim of any sanctions regime is to impose crippling costs on the enemy while suffering little inconvenience yourself. Some economists reckon tariffs would even help theturn a profit at Russia’s expense. Ricardo Hausmann, a former Venezuelan planning minister now at Harvard, points out that if a punitive import tax—of perhaps 90%—were to be added to the price of Russian oil, European refineries would source crude from elsewhere unless they were granted a sizeable discount.
Real life would be messier than economic models. But the broader point, says Guntram Wolff of Bruegel, a think-tank in Brussels, is that Europe has more options to substitute Russian oil than Russia has options to replace European customers. Things are different with gas, given that it is delivered through pipelines which tie producers and consumers together.
Mario Draghi, another economist, who is currently moonlighting as Italy’s prime minister, also wants to hobble Russian energy, but by capping the price paid by Europe for its imported gas instead. In many ways that is similar to a tariff: you limit the flow of money headed to Moscow, and force Russia to adapt. But this approach would do nothing to stymie the demand for Russian energy—on the contrary. It would encourage industry to crave more, not less, of Mr Putin’s now-even-cheaper gas.
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