Energy and the stupidity of sanctions

The invoices for gas and electricity have tripled or quadrupled, and may rise to ten times what household and industries in Europe used to pay for energy a year ago. The price differential of the gas price in the US and Europe – also a factor ten – is likely to anger voters in the coming years: are these smart sanctions? Why would Europe pay more for economic warfare with Russia than the US?

The truth is: not importing gas from Russia is ineffective and counterproductive. First, a military agression should be countered with military action. Sanctions on a country – on its economy and its people – should be used as a last resort. Sun Tzu wrote about that in his ‘Art of War‘: the objective is not to destroy a country or its people but to defeat its army if and when it threatens your sovereignty.

Second, if sanctions are deemed to be necessary, they should not hurt your own economy too much, but the economy of the enemy. Sanctions on this or that country on finished products (say, electronics, cars or consumer goods) are logical: you can, quite simply, procure these from another source. Let us suppose we would be at war with Japan, for example: we would just stop buying Japanese cars and electronics and switch to American, European or Chinese products. That is an effective or smart sanction: it hurts Japan but it does not diminish our purchasing power, resources or wealth.

With energy or raw materials, one cannot switch easily: these are inputs. Demand for them is inelastic, supply cannot be increased in the short run, and, therefore, the shortage or mismatch between supply and demand will drive prices up very quickly (with factors ten or even a hundredfold, as we are seeing for the raw gas price now). It will hurt your economy more than the country you want to punish and may, therefore, be labeled as pure and simple masochism.

I remember talk in the newspapers here in Brussels about how not importing Russian gas would not hurt the Belgian economy because Russian gas had only a very small share in our gas imports. That misses the point completely: even for such small share, we have to find other suppliers, and these other suppliers do get very large demand from countries which were very dependent on Russian gas, such as Germany. Hence, even small customers suffer from extraordinary price rises as supply gets cut on a market that was already tense.

The only way out is to roll back our self-imposed ban on Russian gas, but Europe’s political leaders lack the guts to (1) admit their mistake and (2) to do something about it. Why it is so difficult? Most EU countries reversed their stance on nuclear energy over the past few months. Why not take this logical step too? We can, quite simply, just decide to import gas from Russia again. It will fix the root cause of the huge problem we are facing. Will this disappoint people more than the decision to go for nuclear energy again? I do not see why that should be the case. It is a very necessary step: it is the only way to prevent the total meltdown of the European economy that we are currently witnessing (make no mistake here: it is a lot worse than the 1970s energy crisis, so we have to act).

It will also prevent a swing to extremist right-wing or left-wing political parties (such as Rassemblement National (formerly Front National) in France). These may have extremist views on migration and other topics but they have far less extremist views on Russia than the current political parties at the center. The center is, therefore, no longer a center when it comes to what concerns most voters now: the war with Russia, and the prospect of deepening and worsening it by also entering into a cold war with China.

President Macron scraped through for the second-term (10 and 24 April 2022) presidential elections: the voting in two rounds (typical of France) saved him. I do not think he and other moderate leaders will be so lucky next time. It’s the economy, stupid! Policies that destroy industry and reduce lower- and middle-class families to poverty are sure to get you where you do not want to be in politics.

Also, it is the first time in my life that I would like Belgium to dissociate from the EU’s foreign policy: a von der Leyen and a Borrell are non-elected, and the mandate of EU institutions for foreign policy and defense is very limited. They surely do not have the right to declare war on behalf of the sovereign nation-states within Europe. Also, Russia blew up its dialogue with the EU as a multilateral forum almost two years ago (I wrote about that at the time, anticipating a lot of events and trends that we see happening now). If Finland or the Baltic states want to go much further in sanctioning the Russian people, let them go ahead. Belgium’s leaders and people should not be seen to be part of what is, clearly, just plain warmongering for no good reason.

The frontlines have stabilized, and Russia’s military has been weakened considerably. Now is a time to negotiate a settlement: not peace (that is not possible anymore because of the escalation) but a ceasefire and practical arrangements to stop the bleeding and start reconstruction. The conflict will then just become one of the many frozen conflicts of Eurasia, and we can all focus again on what we should be focusing on: work, family, fun. We should do it now because we are in a position of strength vis-à-vis Russia. The winter will weaken our position. Russians are used to surviving long winters. We are not.

Not deepening or dragging out war – especially because the energy crisis is causing a rapid disintegration of our industrial base (not to mention pushing lower-class households into poverty) – should be a priority now. A matter of life and death, so to speak (sorry that sounds so bitter in this context), rather than about a selection of one single country where the values of freedom or democracy abroad matter more to us than, say, in Syria or in Afghanistan. Also, I repeat we should stay clear of demonizing the Russian people with measures such as visa bans, labelling every Russian resident in the EU as a potential spy (and, worse, calls for systematic checks on them) rather than target Mr. Putin, his regime and the Russian military directly. That is a lesson we Europeans should have learnt from the world wars.

However, let me get back to the point here: when considering economic sanctions, cold economic and political analysis should be used to evaluate and decide whether to implement them and continue them. If the analysis shows they produce the opposite effect (polls show that Mr. Putin’s popularity as a war leader popularity keeps increasing), they should be rolled back. Blindly sticking to things that do not work and hurt ourselves more than the enemy is not wise: if you find yourself in a hole, stop digging, right?

Again, most countries reversed their decision – taken decades ago – to phase out nuclear energy, and this measure to tackle the energy crisis has not met with popular resistance. On the contrary, polls show support in Belgium. Why is it that leaders show no willingness to roll back the decision to no longer import Russian gas? If it is about human rights or whatever, then we should scrutinize our energy imports from countries like, say, Saudi Arabia as well. But banning such imports would not be effective either, right? Gas, oil, rare earth minerals and all the other things that are routinely imported to produce consumer or industrial goods tend to be produced in countries that we do not necessarily like. A consistency check is always a good lens to look at whatever it is that you are trying to decide.

Post scriptum: I have been quite vocal on my Twitter and LinkedIn accounts, and I got a lot of flak for it. At one point, I even got censured on LinkedIn, and I was very surprised about that because my pro-peace comments were everything but inflammatory. I looked at the identities and origin of the angry reactions and I note that a lot of them come from nationals from EU countries that have traditionally different views on Russia and, I must assume, other geopolitical questions too (think of China here) only because of their recent history.

Again, I am surprised that reasonable people act so emotionally on what should be analyzed rather coldly. When talking economic sanctions, cold economic and political analysis should be used to evaluate and decide whether to continue or, in the opposite case, roll them back. That is the point of view that I am defending in this post and on social media. In any case, to get away from personal attacks and emotional one-to-one tits-for-that, I should present something objective on public opinion on these questions. So I quickly googled and found this survey: https://www.euronews.com/my-europe/2022/06/16/europeans-divided-over-how-ukraine-war-should-play-out-reveals-poll. It is a bit dated (June) but it shows how divided public opinion in the EU actually is on the question. It also shows – I am happy about that in light of all the flak I have been getting for being pro-peace – that my views are actually not a minority view. On the contrary, in many of the older EU countries (except the UK, perhaps, but they walked out of the EU so we should not take them into account), people are clearly more rational about this and do consider our current stance to be way out of whack. When the EU Commission and our government leaders start ignoring majority opinion, and when vocal minorities shut down debate on peace and war questions, we are in very deep trouble as a democracy. Not only US democracy but Europe’s democracy as well has become a bit of an international joke. :-/

To end on a happy note, I am a fan of American culture (do not be surprised: I like culture in general). Especially music (I like action hero movies too but the apocalyptic element in many of these looks frightening real now). Two songs that come to my mind right now is Coolio’s Gangsta’s Paradise and Where Is The Love from the Black Eyed Peas. A quote from the latter song: “The truth is kept secret, it’s swept under the rug; If you never know truth then you never know love.” And just one line from the first: “Tell me why are we so blind to see that the ones we hurt, are you and me?” :-/ I am now going to focus on life and fun again. Politics – both national as well as international – are too depressing to follow lately. 🙂

2 thoughts on “Energy and the stupidity of sanctions

  1. Pingback: Sun Tzu on War

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