Boomerang effect when the West "weaponized" oil to deal with Russia

The West hopes that influencing Russian energy will make Moscow falter in its military campaign in Ukraine, but the reality is going in the opposite direction.

After Russian President Vladimir Putin announced the opening of a military operation in Ukraine, the US and its EU allies in turn imposed sanctions on Russia's fossil energy industry. The West expects a scenario where Russia's energy backbone industry will weaken, leading to them not having enough financial resources to sustain the war and, in the long run, to affect the country's economy.

According to the New York Times , that prospect is unlikely to materialize, at least for now because of the Boomerang effect these measures create. Boomerang is a device that, when thrown, returns to the starting point. The concept of the Boomerang effect refers to the fact that one side causes an impact on the other side and at the same time is also affected in return.

In this case, the West calculates that the sanctions will cause great harm to Russia, but due to a number of factors, it has the opposite effect, causing the US and European economies to be negatively affected. On the other hand, in the short term, Russia has found a way around the embargo, reducing the effectiveness of these measures.

China and India, the two most populous countries in the world and neutral in the Russia-Ukraine war, quickly bought up the amount of oil from Moscow that was embargoed by the West. The price of oil has skyrocketed to the point where Russia makes even more revenue from oil than it did four months before the war. The ruble depreciated briefly after the "storm" of sanctions, but then rose sharply thanks to the intervention measures of the Russian government.

The impact of sanctions on Russia's economy is real, but the West is also facing a crisis in energy prices, leading to record inflation - factors that put pressure on the US government and other countries. EU.

Some experts believe that the Western embargo on Russian oil has not been fully effective, and the goal of thousands of sanctions imposed on Moscow in the past time is to create a lasting impact. Observers said that the West expected that, after the war, Russia would be hindered in banking and other industries. But in the short term, the fossil fuel industry is still helping Russia to stay and it still has a budget for the military campaign.

"Things turned out much better than the worst-case scenario," said Yevgeny Nadorshin, chief economist at consulting firm PF Capital in Moscow. ".

In the short term, though, the strategy of the United States and its allies to influence Russian resolve appears to have experienced a boomerang effect.

In May, China increased its imports of Russian oil by 28% from the previous month, reaching a record high. Russia becomes China's largest oil exporter. India, which used to buy a small amount of oil from Russia, now buys up to 760,000 barrels per day.

"Asia has saved the Russian crude oil industry. Russia, instead of going into recession, is almost back to the level before the Covid-19 epidemic ," expert Viktor Katona from Kpler (France) commented.

Russia benefits from energy

According to Rystad Energy, an independent research and business analysis firm, Russian crude oil sales to Europe fell 554,000 bpd from March to May but partners in Asia increased their imports from Moscow. adding 503,000 bpd - roughly the same offset. Russia took in $1.7 billion from this commodity last month compared with April, according to the International Energy Agency.

It remains unclear whether Asia will buy all the Russian oil it sells to Europe, as the EU is working to break away from the Kremlin's reliance on energy exports. But for now, the change has allowed Moscow to maintain oil production levels and upset expectations that its output will fall.

The combination of Russia's steep discounts on crude oil prices and soaring gasoline and fuel prices, analysts say, has helped refine refineries in Asia make big profits. According to the Finland-based Clean Air and Energy Research Center, some of the oil products that India exports have been exported to the US, UK, France and Italy.

Once the crude oil is converted into diesel or gasoline, no one can tell whether they are of Russian origin or not. That means the West may still be indirectly paying to buy Russian energy at a higher price.

The continued increase in global energy demand makes Western efforts to pressure Russia less effective, at least in the short term.

Aleksei Miller, head of Russia's energy giant Gazprom, said last week that even as Russia's EU natural gas imports have fallen by several dozen tens of percent, their prices have doubled. several times.

However, the expert warned that Western sanctions are likely to cause further damage to the Russian economy later this year. And while the rally in Russia's currency, the ruble, is due in part to the country's surprising economic resilience, it also reflects tight government controls over capital flows and a decline in capital flows. strong imports into Russia.

It is also difficult to determine how much money Russia will pour into the war in Ukraine in the near future, but there is no evidence that Putin is under domestic pressure to end the war before achieving his goals. pepper. However, experts surmise that Russia may find it difficult to secure its military budget if the hostilities drag on.

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