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The West is disillusioned after more than 100 days of sanctions aimed at cutting off Russia’s economic lifeline

Has Europe reached the limit of sanctions?

The determination behind the sanctions of The West for Russia is being shown more and more clearly. The US Senate has just approved a $40 billion aid package, at least $15 billion of which will go to the Ukrainian armed forces, with the rest going to another front in the conflict with Russia: the geo-war economy.

The European Union (EU) also officially approved the 6th package of sanctions against Moscow, including gradually reducing oil imports from Russia and removing some of its banks from the SWIFT international payment system. But even as the EU praises the harsh restrictive measures it has imposed on Russia, the bloc still has to make concessions, such as a temporary waiver of sanctions on pipeline imports of crude oil. some member countries depend on Moscow’s supply.

Despite tough sanctions efforts, Russia’s economy remains resilient, thanks in large part to record-high hydrocarbon prices and continued European gas purchases. Since Russia launched a military campaign in Ukraine in February, the West’s main weapon on the economic front has remained sanctions: severing banking links, barring Russian businesses from accessing markets. USD market and freeze Russian assets abroad, ban the import of Russian coal. Europe is also having fierce debates about how to completely ban fuel for Russia.

Analysts say that, up to now, the West seems to have chosen to pursue what is called a “supply-side strategy” to weaken the Russian economy, but has not offered a specific plan. on dealing with the consequences that such a strategy might have.

There are growing calls for tougher sanctions to be imposed and to find a way to introduce a complete ban on hydrocarbons and Russian banking. But all parties involved in the discussion were aware that the costs of making such moves would be enormous. And when Western attention is no longer focused on the Russia-Ukraine war, resolve to pass new sanctions can quickly wane. For his part, President Putin has clearly demonstrated that regardless of which direction the West decides to go, he will continue the military campaign in Ukraine and is ready to spend more on defense.

Economic “nuclear bomb”

Hungarian Prime Minister Viktor Orban is considered one of the factors that challenge European unity by repeatedly blocking the bloc’s efforts to target the Russian energy sector. But fatigue and morale seem to extend far beyond Budapest. The price to pay to hit Russia’s economic lifeline – energy – is swirling in the minds of many EU leaders at a time of rising inflation and economic recession, while Moscow has consistently achieved new advances on the Ukrainian battlefield after 100 days of fighting.

The division over sanctions against Russia, and differences of opinion within and outside the European Union on how the conflict can be ended, seem to frustrate the EU. Estonian Prime Minister Kaja Kallas, who is consolidating his ruling coalition, has expressed hope that he can tighten his grip on Russia. But she conceded that things will become more difficult after the sixth sanctions and it is less likely that the EU will continue to impose restrictions on gas imports in the next round of sanctions.

“It is time to take a different approach or suspend sanctions,” said Belgian Prime Minister Alexander De Croo.

There is no easy fix for the fatigue caused by sanctions. According to observers, a financial weapon is an imperfect tool, often executed in a patchy manner and easily lead to unpredictable consequences. Unprecedented large-scale sanctions against Russia, which will reduce the country’s gross domestic product by 10% in 2022. But it is also a “double-edged sword”.

High energy prices have increased Russia’s budget revenue, while draining the pockets of importers. In the first four months of 2022, Russia’s current account surplus reached $96 billion – more than triple the figure in the same period in 2021. According to estimates by Bloomberg Economics, Russia’s oil and gas revenue is expected to be estimated to reach 285 billion USD this year.

Europe thinks that the seizure of yachts and villas of Russian oligarchs can be an effective measure, but they have been disappointed to see Western companies leaving Russia to sell a series of assets to Russia. billionaires are still outside the sanctions.

Many European analysts believe that, to cope with the consequences of sanctions, the West needs to first strengthen its economic defenses at home. Barclays Plc estimates a complete embargo on Russian natural gas could reduce eurozone GDP by 4%. Without economic support for businesses and households, the ban could create an economic “nuclear bomb”, as Prime Minister Orban warned.

A recent YouGov survey found European public opinion somewhat mixed: More than 30% of respondents in seven countries, including Spain and Italy, support investment in trade and diplomacy. with Russia, instead of defense and security. Without the “light at the end of the tunnel” in the economic sphere, the mood of Europeans could change.

The Russian-Ukrainian conflict has yet to see an end, but the impact of the economic war on all aspects of life is clear: living standards fall in developed countries while developing countries face starvation, public debt crisis and food insecurity. The current war is testing the endurance limit of not only Russia, Ukraine but also the whole of Europe.

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