Searching for alternatives, the Treasury Department is advocating allowing Russian energy exports with price caps rather than simply trying to reduce export volumes. Treasury Secretary Janet L. Yellen says this proposal will advance “our twin goals of sharply reducing Russian revenue and stabilizing global energy prices.” She will be trying to drum up support among the Group of 20 finance ministers this week in Bali.
The oil-price cap is intended to counter Russian President Vladimir Putin’s “war on the US economy,” in Yellen’s words. But the plan risks distracting the pro-Ukraine coalition from the hard work of squeezing Russia, in favor of chasing domestic US priorities — thus endangering Washington’s effort to defeat Moscow’s unprovoked aggression in Ukraine. Treasury’s idea is yet another sign that it is institutionally incapable of robustly enforcing economic sanctions.
Instead, the proposal, academic and untried, faces multiple practical obstacles and uncertainties. Widespread sanctions violations by Russian maritime cargoes already exist, with no reason to think the oil-price cap is more enforceable.
An additional aspect of the administration’s incoherence came on the eve of Russia’s attack in February, when US climate envoy John F. Kerry blurted out another fear: the coming war’s “massive emissions consequences.” His plaintive message: “I hope President Putin will help us to stay on track with respect to what we need to do for the climate.”
The Biden administration’s worrying about consumer gas prices, blindness to inflation’s money-supply causes and obsession over climate change have led it to untested international price-fixing. This internally contradictory muddle is unlikely to achieve its stated objectives fully. Worse, latching on to the untried and risky oil price-cap concept could bring the entire sanctions regime into question.
President Biden’s national security team should focus single-mindedly on repelling Russia’s invasion, not pretending that Putin is causing inflation. The administration should step up military aid and go for the win economically, using crushing sanctions to cripple Russia’s productive capacity, and, if possible, cripple Putin’s regime politically.
Reducing Moscow’s economic capacity most effectively means pressuring exports downward to as close to zero as possible, at which point any purchase price is irrelevant. Conduct the diplomacy required to discourage or pressure existing Russian customers, utilizing secondary sanctions if necessary, especially against China.
As for higher energy prices that would result from keeping Russian oil off the market, Biden should more robustly and urgently encourage production domestically and by our allies. If he is unwilling to undertake this effort, he is saying effectively, “We support Ukraine, but only if it is contemporaneously cost-free.”
We must clearly understand the brutal role that sanctions can play. President Woodrow Wilson forthrightly called them a “silent, deadly remedy.” Effective sanctions are a form of warfare, not virtue-signaling or ivory-tower supply-and-demand calculations. The alternative to economic violence against Russia is military violence. Take your pick.
For decades, the Treasury Department and other responsible agencies, with rare exceptions, have missed the strategic picture. Today, these persistent institutional failures plague enforcement of Russian sanctions. Nothing like “maximum pressure” results from all-too-common practices such as delaying the effective dates of sanctions. Other impediments: approaching sanctions as though every decision required full judicial due process, rather than being the exercise of the foreign-affairs and war powers; including extensive waiver provisions; and using lax enforcement.
Government officials worry incessantly about “overcompliance,” as though sanctions were merely an unpleasantness to be minimized. Newly promulgated sanctions typically explain how to avoid committing violations, ironically thereby providing road maps that undermine the sanctions themselves. It is no consolation that Europe is even worse at this.
To paraphrase Finley Peter Dunne, sanctions ain’t beanbag, at least those intended to work. One solution is to transfer the function from Treasury and like-minded agencies to the Defense or Justice departments, or even create a separate office reporting to the National Security Council. Someplace where they don’t play beanbag.
Aspiring Republican presidential candidates should emphatically reject the Russian oil-price cap, thereby providing the political clarity that an ethereal Treasury Department has lost.
Worryingly, the price-cap notion, pursued by the Biden administration more out of domestic political worry about rising gasoline prices than as a weapon against Russia, feeds the creeping impression that the West thinks Ukraine’s resistance has proceeded long enough — time to focus on other matters, as French President Emmanuel Macron, in effect, argues.
But such shifting of focus would reward Moscow’s belligerence. To avoid repeating previous mistakes, sanctions should remain totally effective until both Russia’s 2014 and 2022 Ukraine invasions are fully reversed.
China is intently watching how Western sanctions against Russia play out. Weakness, confusion and short attention spans will only strengthen Beijing’s view that the West lacks the resolve to deter or effectively oppose military aggression. Treasury’s price-cap idea is Exhibit A.