President Joe Biden responded to Russia’s invasion of Ukraine Thursday with a major sanctions package targeting Moscow’s financial institutions.
“Some of the most powerful impacts of our actions will come over time,” Biden said in a White House address, “as we squeeze Russians’ access to finances and technology for strategic sectors of its economy and degrade its industrial capacity for years to come.”
Sanctions implemented with western allies aim to hinder President Vladimir Putin’s ability to finance the Russian military with export blocks on high-tech goods while additional measures target members of elite society, including Putin’s inner circle.
Absent from the package, however, is any lever to curtail Russian profits from its lucrative energy industry. Deputy National Security Advisor Daleep Singh made that much clear at an evening White House briefing.
“Our sanctions are not designed to cause any disruption to the current flow of energy from Russia to the world,” Singh said, twice, leaving untouched a key source of revenue for the Kremlin.
Failure to go after the Russian energy sector is a consequence of western allies’ inability to do so without risking economic blowback beyond the boomerang effect already presented by this week’s sanctions. Europe is hooked on Russian gas after knee-capping its own capacity for instantaneous power through fracking bans while Russia produces more than 10 percent of the world’s oil. Prices of Intercontinental Exchange Brent crude oil, the international benchmark, already eclipsed $100 a barrel upon the eruption of Russia-Ukrainian tensions, with gas prices expected to soar beyond $5 a gallon nationally from levels already at seven-year highs.
Biden sought to reassure Americans concerned over the international turmoil translating into higher energy prices Thursday with a pledge his administration is using “every tool at its disposal to protect American families and businesses from rising prices at the pump.” Except he isn’t.
If President Biden were serious about countering Russian aggression, he’d unleash American oil and gas production to reclaim the energy independence forfeited within the span of a year. Instead, one of Biden’s first moves in office on day one was a suspension of new drilling leases on federal lands.
While overturned five months later, only to be quietly reinstated through a legal maneuver just last weekend, the halt in new lease sales sent a signal to Wall Street discouraging investment in the capital-intensive industry that suppressed production and drove up energy costs. Complemented by a cascade of taxes, environmental regulation, and outright bans on drilling, Biden’s energy policy implemented at the behest of his left-wing base has served as self-destruction for American energy independence, and with it, a key for negotiating with Moscow.
According to the Energy Information Administration (EIA), the United States is now forecasted to once again remain a net-importer of oil under Biden after a brief stint as net-exporter during the Donald Trump years. From Russia, the United States still imports nearly 600,000 barrels of oil every day. In contrast, the Keystone XL Pipeline Biden shut down was supposed to transport 830,000 barrels at peak capacity.
Biden didn’t sanction the Russian energy sector, because he couldn’t have. Trump could have, and probably would have. In fact, while Biden greenlit the Nord Stream 2 pipeline into Germany that would have enhanced a premier NATO ally’s already inflated reliance on Russian natural gas, Trump blasted the European energy deals as dangerous.
“It’s very sad when Germany makes a massive oil and gas deal with Russia,” Trump told NATO Secretary-General Jens Soltenberg in 2018 during a trip to Brussels. “We’re supposed to be guarding against Russia and Germany goes out and pays billions and billions of dollars a year to Russia.”
Nearly four years later, the western alliance is now paying the price for its dependency on Russian power. Germany, which sabotaged itself with a phase-out of nuclear and imports more than 70 percent of its energy supplies, became an unreliable partner in negotiations in the early stages of the Ukrainian crisis. While the nation axed plans to certify the Nord Stream 2 as a punishment for Putin’s move on Ukraine, more sanctions on Russian gas imports could present a severe disruption to its energy needs.
Russia had previewed its ability to manipulate European energy markets last fall when the continent suffered high prices from a low-wind winter, rendering unreliable wind turbines just that, unreliable. Putin refused to ramp up gas supplies as Europeans suffered through the energy crisis. While seen as an effort to strong-arm certification of Nord Stream 2, the effort may have also been a pretext for war, leaving European reserves “below the minimum volume” by December for the first time in five years.
A strong American energy industry operating at unleashed capacity could not only minimize economic pain domestically, but it could diminish the Kremlin’s influence in European markets as new liquified natural gas terminals continue to come online.
Capital and labor-intensive oil and gas operations, however, are no light switch, and Europe’s energy transition coupled with Biden’s negligence removed a primary cudgel for the west’s ability to taper Putin’s violent motivations. Yet President Biden has shown no signs to start the process of reclaiming American energy.