Breaking US-Russia Energy Relations: Crushing Blow to Putin, Possible Political Trap for Biden
The United States is now distancing itself from its European allies following months of solidarity. The Europeans will continue to finance the Russian war machine.
At home, with the midterm elections knocking at the door, increased gas prices and rising inflation will likely exact a heavy price on the president. The severing of energy relations between the United States and Russia is, of course, a very dramatic move. Its economic significance is self-evident.
The United States imports half a million barrels of oil from Russia every day, along with oil products, gas and coal. American companies over the years have invested billions of dollars to develop energy sources in Russia. An unknown number of Americans are invested in companies investing in Russian energy. All of this is now coming to an end. (It will take 45 days to allow exiting from existing contracts.)
However, this process also has such far-reaching political significance that it is difficult to define.
In an evening announcement, President Joe Biden increased sanctions on Russia, but he acted unilaterally. Previously, Biden coordinated sanctions with America’s NATO allies and the EU. This time, the United States acted alone in imposing sanctions. Europe, desperately dependent on Russian gas and to a lesser extent oil, is not joining in.
This means that after a prolonged demonstration of solidarity with respect to action and goals, a certain crack has appeared in the trans-Atlantic wall against Russia’s war in Ukraine. It is difficult to know if the crack will get wider and what the weakest spots will be.
Even Britain, which has very aggressively opposed Russia in Europe (within NATO, after leaving the EU) is vowing to end energy relations with Russia by the end of the year. Following from this, the EU is pledging to stop two-thirds of its Russian gas supply by the end of the year. This is a huge economic and financial step likely to deliver a mortal blow to Russia. However, the war in Ukraine is being waged in terms of hours and days, not months. Delaying action until the end of the year would ensure that Russia continues to receive huge sums of money. Its receipts from Europe on the eve of the invasion of Ukraine stood at $650 million per day. European money, therefore, will continue to finance the war.
'The Ruble Is Worth Less Than a Cent'
Biden overlooked two matters in recent days. From the start, he removed the issue of energy from the total package of sanctions, something he announced the day after the Russian invasion at the end of last month.
Even without addressing energy, the sanctions had teeth, and their impact was immediate. Russia’s central bank was cut off from its foreign currency reserves and it was difficult to back the ruble. Biden has not missed the opportunity to point out that the ruble “is now worth less than one American penny.” He avoided responding to questions about imposing sanctions on the energy sector in the coming days. The unpersuasive formula coming from the White House was that everything is on the table.
However, internal political pressure from the left and right continued to grow. House Speaker Nancy Pelosi, the most powerful Democrat in Congress, announced that she would support a bill to ban imports of Russian energy. Lead editorials in The New York Times and The Wall Street Journal, which have difficulty agreeing on anything, agreed that the knife should fall on the neck of the Russian energy branch.
Ukrainian President Volodymyr Zelenskyy, who has soared to amazing heights in the eyes of the world, spoke virtually last weekend with dozens of members of Congress, seeking an end to energy relations with Russia.
Fuel Pumps and Ballot Boxes
The White House cannot, and perhaps has no wish to, confront this pressure. However, its response is likely to exact an economic and political price at home. The price of oil is nearing historic records and stands today at $140 per barrel of Brent crude. Russia warned yesterday that sanctioning its oil in the global market will eliminate 5 million barrels a day and raise the price of a barrel of oil to $300. Even if this is a significant exaggeration; there is no doubt that prices will continue to increase.
The average price of a gallon of fuel in the United States stands at $4.17 (approximately $1.10 per liter), a historic record. In parts of the United States, it has already reached approximately $4.70. These prices are having an immediate financial effect on millions of Americans. These prices also have a clear effect on the rate of inflation, which is already higher than it has been in 40 years, and are having a chilling impact on economic growth.
They also have a very clear effect on politics and Biden’s standing. Congressional midterms will take place In eight months; all the seats in the House of Representatives and one-third of the seats in the Senate are up for election. Even without the crisis in Ukraine, the winds are blowing in the direction of the Republican opposition. The crisis at the gas pumps will likely highlight how weak the majority Democratic Party is even further.
Biden has not yet successfully convinced Americans about his ability to lead. An international crisis, particularly one incited by a hostile power, tends to unify the ranks. This happened 82 years ago, when Adolf Hitler invaded Poland. This crisis, however, depends to a great extent on the ability of the person in the White House to inspire and engender trust. This mission sometimes appears too heavy for Biden to bear.
At home, with the midterm elections knocking at the door, increased gas prices and rising inflation will likely exact a heavy price on the president. The severing of energy relations between the United States and Russia is, of course, a very dramatic move. Its economic significance is self-evident.
The United States imports half a million barrels of oil from Russia every day, along with oil products, gas and coal. American companies over the years have invested billions of dollars to develop energy sources in Russia. An unknown number of Americans are invested in companies investing in Russian energy. All of this is now coming to an end. (It will take 45 days to allow exiting from existing contracts.)
However, this process also has such far-reaching political significance that it is difficult to define.
In an evening announcement, President Joe Biden increased sanctions on Russia, but he acted unilaterally. Previously, Biden coordinated sanctions with America’s NATO allies and the EU. This time, the United States acted alone in imposing sanctions. Europe, desperately dependent on Russian gas and to a lesser extent oil, is not joining in.
This means that after a prolonged demonstration of solidarity with respect to action and goals, a certain crack has appeared in the trans-Atlantic wall against Russia’s war in Ukraine. It is difficult to know if the crack will get wider and what the weakest spots will be.
Even Britain, which has very aggressively opposed Russia in Europe (within NATO, after leaving the EU) is vowing to end energy relations with Russia by the end of the year. Following from this, the EU is pledging to stop two-thirds of its Russian gas supply by the end of the year. This is a huge economic and financial step likely to deliver a mortal blow to Russia. However, the war in Ukraine is being waged in terms of hours and days, not months. Delaying action until the end of the year would ensure that Russia continues to receive huge sums of money. Its receipts from Europe on the eve of the invasion of Ukraine stood at $650 million per day. European money, therefore, will continue to finance the war.
'The Ruble Is Worth Less Than a Cent'
Biden overlooked two matters in recent days. From the start, he removed the issue of energy from the total package of sanctions, something he announced the day after the Russian invasion at the end of last month.
Even without addressing energy, the sanctions had teeth, and their impact was immediate. Russia’s central bank was cut off from its foreign currency reserves and it was difficult to back the ruble. Biden has not missed the opportunity to point out that the ruble “is now worth less than one American penny.” He avoided responding to questions about imposing sanctions on the energy sector in the coming days. The unpersuasive formula coming from the White House was that everything is on the table.
However, internal political pressure from the left and right continued to grow. House Speaker Nancy Pelosi, the most powerful Democrat in Congress, announced that she would support a bill to ban imports of Russian energy. Lead editorials in The New York Times and The Wall Street Journal, which have difficulty agreeing on anything, agreed that the knife should fall on the neck of the Russian energy branch.
Ukrainian President Volodymyr Zelenskyy, who has soared to amazing heights in the eyes of the world, spoke virtually last weekend with dozens of members of Congress, seeking an end to energy relations with Russia.
Fuel Pumps and Ballot Boxes
The White House cannot, and perhaps has no wish to, confront this pressure. However, its response is likely to exact an economic and political price at home. The price of oil is nearing historic records and stands today at $140 per barrel of Brent crude. Russia warned yesterday that sanctioning its oil in the global market will eliminate 5 million barrels a day and raise the price of a barrel of oil to $300. Even if this is a significant exaggeration; there is no doubt that prices will continue to increase.
The average price of a gallon of fuel in the United States stands at $4.17 (approximately $1.10 per liter), a historic record. In parts of the United States, it has already reached approximately $4.70. These prices are having an immediate financial effect on millions of Americans. These prices also have a clear effect on the rate of inflation, which is already higher than it has been in 40 years, and are having a chilling impact on economic growth.
They also have a very clear effect on politics and Biden’s standing. Congressional midterms will take place In eight months; all the seats in the House of Representatives and one-third of the seats in the Senate are up for election. Even without the crisis in Ukraine, the winds are blowing in the direction of the Republican opposition. The crisis at the gas pumps will likely highlight how weak the majority Democratic Party is even further.
Biden has not yet successfully convinced Americans about his ability to lead. An international crisis, particularly one incited by a hostile power, tends to unify the ranks. This happened 82 years ago, when Adolf Hitler invaded Poland. This crisis, however, depends to a great extent on the ability of the person in the White House to inspire and engender trust. This mission sometimes appears too heavy for Biden to bear.
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