Europe must stop paying for Russia's war by Ian Bond, Zach Meyers and Elisabetta Cornago
Putin wants Europe to pay for gas in roubles, forcing it to deal with Russia’s central bank. Europe should respond by ending Russian hydrocarbon imports sooner than planned. Russia’s war on Ukraine may be settling into a bloody stalemate for now, with both sides able to win local victories, but neither able to defeat the other decisively. Russian President Vladimir Putin has opened a new front economically, however, in demanding that “unfriendly countries” pay for Russian gas in roubles. That could force them to transfer hard currency to the Central Bank of Russia to buy the roubles they need. In effect, Putin wants to force Europe to circumvent its own sanctions, and prop up his currency for him. Europe should decline to play this game. It should go further, however. It should stop spending up to €800 million per day on purchasing Russian gas. The higher the gas price rises, the more money flows into the Russian government’s coffers, to be spent on – among other things – invading Ukraine. Even as Western governments supply Ukraine with the weapons to defend itself, and sanction Russia, European consumers are subsidising Putin’s war. Russia’s greatest economic vulnerability is its dependency on revenues from selling fossil fuels. In 2021, revenues from those products made up 35 per cent of Russia’s budget income; and Russia exported more than 49 per cent of its oil and 74 per cent of its gas to Europe. It seeks to mitigate this weakness by playing on Western fears of energy shortages. These fears
are not completely unfounded, but they are exaggerated. Europe’s winter is ending; though industry might still have problems with supply constraints and higher costs, which would justify some state financial aid, there is less risk of gas running out for domestic heating. Europe has a few months to find alternative sources of supply, introduce energy efficiency measures and find ways to soften the blow of (inevitable) higher prices for as long as the crisis in relations with Russia lasts – which could be a long time. The West can constrain Russia’s war effort, and its economic development, by starving the Russian government of the revenues it needs. If Europe were able to stop purchasing Russian oil and gas immediately, that might be the most effective sanction it could impose. The political will to take such a radical step is still absent, however. German Chancellor Olaf Scholz told the Bundestag on March 23rd that cutting off supplies from Russia overnight would plunge Europe into recession and put hundreds of thousands of jobs at risk, although estimates by some economists paint a somewhat more moderate picture. He is not the only European leader who wants a gradual transition away from Russian fossil fuels. But if Europe is not ready to deprive itself of about 40 per cent of its gas and 25 per cent of