Monday

18th Oct 2021

Opinion

Holding Putin over a barrel

  • Low oil prices have masked the ineffectiveness of the EU's Russia sanctions (Photo: European Community)

Tomorrow, (19 March) EU leaders arrive in Brussels for a two day summit where they will discuss energy security, Ukraine, and the EU economy.

With sanctions against Russia due to expire in July, and amid deep divisions as to whether to extend the punitive measures for another six months, talks over the Ukraine crisis undoubtedly prove to be one of the thorniest.

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Some EU member states, notably the UK, Poland, and the Baltic states, are in favour of extending the sanctions on energy, finance, and the defence sectors.

Others, including France, Spain, and Austria are against, either out of fear that early extension may provoke Moscow and endanger the fragile Minsk 2 agreement, or out of a desire to return to a normalisation of relations.

To heed these calls for normalisation however would be naive, for they beget the very intra-EU divisions and rifts in the transatlantic alliance that Vladimir Putin wants.

Off to a Slow Start

The initial European response to the Ukraine crisis was apathetic to say the least. Caught off guard by the annexation of Crimea, and marred by internal divisions, asset freezes and travel bans against those involved in the takeover were the initial weapons of choice. However, to little effect.

Unimpressed even by the exclusion from the G8, Russia pressed ahead with its proxy war in the east of Ukraine.

In fact, it was not until the MH17 disaster that EU leaders woke up to the reality of a war on the eastern border, prompting them to press ahead with sanctions on financial markets, energy, and defence that started to impact the Russian economy.

Militarily, Nato too was not particularly quick off the mark. Despite having launched the Baltic air-policing mission on relatively short notice, the real question on the alliance’s plate was what Nato would do "on the ground" to defend vulnerable states in the east.

The September 2014 summit agreed to the formation of a spearhead force able to deploy at short notice against threats to Nato territory. Also, Nato states pledged to shore up their commitment to spend 2 percent of their GDP on defence.

Although most Nato countries in eastern Europe are planning increases, the sad reality is that six countries are cutting spending, including major players such as the UK, Germany and Italy.

The UK - which hosted the Summit - will see its defence spending fall below the Nato target, much to the ire of Washington.

Why we should thank the Frackers

Since last summer, the collapse of the rouble, capital flight, and the inability of major Russian companies to raise sufficient money on EU and American capital markets have caused several of Putin’s oligarchs to come knocking on the Kremlin’s door.

Arguably the biggest factor in putting pressure on Russia did not come from Brussels at all. Rather, it is the US shale oil industry, coupled with OPEC’s indecision, that should be firmly thanked for bankrupting the Kremlin.

America’s "frackers" unleashed the current oil supply glut, and with it, they completely upended the international oil market.

Oversupply, weak global economic forecasts, and Saudi Arabia’s decision to not intervene in the global oil market - although for market share reasons, rather than geopolitical motives - sealed the deal.

Oil lost over half its value since June 2014.

Today, despite the "rig count" in the US going down, US oil production is still increasing. Furthermore, the international oil market shows no signs of recovery.

Moreover, if Iran clinches a deal on its nuclear programme that would allow Tehran to export more oil, coupled with the observation that current storage levels are near record high and will run out of space at some point, a second price plunge is a real risk. Not to us, but it is to the CEO of the Kremlin.

Unity in diversity, not divide and rule

The collapse of the price of oil has masked the fact that Europe’s response to the Ukraine crisis has been vacillating, slow, and toothless. More worryingly, it has also masked the fact that Putin exploited the war in Ukraine to drive wedges in Europe’s house.

Whether it is Cyprus, Greece, Bulgaria, Hungary, Austria, or Italy, Putin has used his war by stealth in Ukraine as a smokescreen to raise a new curtain to divide Europe.

It may be less visible than the one that divided the continent in the second half of the 20th century, but it could be equally effective, if not more so. But rather than through the barrel of a gun, various European countries are being lured by monetary gains enabling Moscow to hold sway over them.

With oil revenues declining, these countries should realise that this situation cannot last - and so should Brussels.

This is why Europe, together with America, should hold Russia to the Minsk 2 agreement, and not relax sanctions unless real progress is achieved in bringing the conflict in Ukraine to an end.

As Benjamin Franklin said when American unity was at stake: “we must all hang together or assuredly we will hang separately.”

Given that Moscow already has some EU countries on a leash, a real affirmation of European unity is more necessary that ever.

Sijbren de Jong, Willem Th. Oosterveld and Willem Auping are analysts at the Hague Centre for Strategic Studies (HCSS), while Daniel Fiott is a researcher at the Institute for European Studies at the VUB Brussels university

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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