More US sanctions on Russia over Crimea. Why energy is largely untouched. (+video)(Read article summary)
In the latest round of sanctions against Russia for its annexation of Crimea, President Obama blocked an additional 20 prominent Russians from visiting or doing business with the US. But Thursday's list largely avoids targeting a major source of Russia's revenue and influence: energy.
President Obama stepped up the US response to Russia's annexation of Crimea Thursday, blocking an additional 20 Russians from visiting or doing business with the United States. Most are prominent Russian oligarchs with ties to banks and occupy government posts. The expanded sanctions are aimed at limiting the financial and political activities of Russian President Vladimir Putin's government while assuring Eastern Europe allies they have Washington's backing.
"America’s support for our NATO allies is unwavering," Mr. Obama said on the South Lawn of the White House Thursday. "We’ve already increased our support for our Eastern European allies, and we will continue to strengthen NATO’s collective defense, and we will step up our cooperation with Europe on economic and energy issues as well."
Apart from Gennady Timchenko, the head of Volga Group, an oil and gas investment group, Thursday's list largely tiptoes around the most delicate topic of the sanctions conversation: energy. That may frustrate those in Washington and abroad who have called for a more aggressive targeting of Russia's resource wealth, but – for now at least – Obama's hands may be tied.
There is little in the way of energy trade between Russia and the US, so cutting it off wouldn't have much impact on either side. It might only provoke more Russian aggression toward Europe, where a breakdown in fuel supplies would cause a lot of pain. (Europe gets about 30 percent of its natural gas from Russia.) The most effective options for US intervention are not punitive sanctions against Russia but constructive support for Ukraine and its neighbors – aiding them in their pursuit of non-Russian sources of energy, including from the US.
However, diversifying European energy and boosting US exports are years-long solutions to challenges that are unfolding day by day. They aren't guaranteed to work, either, and could have negative economic and environmental impacts domestically. Still, some say a strong signal of long-term energy support from the White House would benefit Europe, both in the near term and in the future.
“The U.S. must take a long perspective on what its coming energy-export-superpower status will mean, make sure it is achieved, and make clear the political significance for countries now too dependent on Russian energy," writes Walter Connor, who directed Soviet and East European Studies at the State Department's Foreign Service Institute between 1976 and 1984. "In the shorter term, all kinds of aid/support for reform and stabilization in ‘mainland’ Ukraine must be lined up now," Mr. Connor, who now teaches at Boston University, writes in an e-mail statement.
Some in Washington might want to see the US take a page from its Iran playbook and immediately target Russia's oil and gas sector – which accounts for about half of Russia's federal revenue. Limiting Russia's energy industry would deal a huge blow to its economy, and might make Putin take a seat at the negotiating table.
But Russia does not export any natural gas to the US, and what little oil Russia exports to the US has been largely replaced by increases in domestic US production and imports from Canada and Brazil, according to the US Energy Information Administration. Any breakdown with the West would probably just speed up Russia's efforts to tap China, Japan, and other energy-hungry markets in the East.
That's not to say there aren't Americans and Russians who stand to lose from heightened Cold-War-era tensions. US oil supermajor Exxon Mobil has inked billion-dollar deals with Russia's state-owned oil company Rosneft to extract resources in the Black Sea, the Arctic, and elsewhere. California-based Chevron has spent billions on pipeline projects in Russia. Tensions alone could put those partnerships in jeopardy, and the Obama Administration said Thursday it is still considering the energy industry as a potential target for sanctions.
"Even if Western governments don't sanction [the energy industry] there is the prospect of Russian retaliation," says Edward Chow, who spent 20 years with Chevron in US and overseas and is now a senior fellow in the energy and national security program at the Washington-based Center for Strategic and International Studies. "The security and political situation would at least have to stabilize to understand what the effects are." Mr. Chow spoke by phone earlier this week, before the latest round of sanctions.