A Russia Energy Embargo Would Show the EU Can Act in the Shared European Interest

Together with the rest of the G7 and other advanced economies, including Australia, New Zealand, Singapore, South Korea, Switzerland, and Taiwan, the EU has introduced sweeping and unprecedented sanctions against Russia. Exports of key technologies have been banned, some Russian banks (but not the big ones) have been blocked from the SWIFT financial messaging network, approximately €300 billion of Russia’s foreign exchange reserves have been frozen in Western financial institutions, and a steadily growing lists of European and other firms have withdrawn from Russia.

On the other hand, the EU has to date been unable to agree on stopping its imports of Russian energy, due to the high degree of dependency on Russian fossil fuels in several member states, including Austria, Germany, Italy, and several Eastern European members. As a result, the EU still pays hundreds of millions of euros daily to Russia for energy imports. While the Russian war effort is overwhelmingly financed in rubles rather than foreign exchange, these EU energy imports provide crucial tax revenues to Russia and have allowed its central bank (together with extensive capital controls) to restore the exchange rate of the ruble back to prewar levels. A stabilizing exchange rate and energy revenues derived will not bring back the many Western goods and services now withdrawn from the Russian market, but it will help the government avoid dramatic increases in inflation by avoiding having to print as many new rubles to pay for the war effort. The EU continuing to import Russian fossil fuels therefore is an indirect, but very significant financial support for Moscow’s war effort in Ukraine.

The EU’s failure so far to cut off Russian energy imports is a clear failure to act on common European interests. The war is being fought on the territory of one of the EU’s neighbors, giving it an unmistakable strategic interest in an urgent conclusion in Ukraine’s favor. Moreover, especially since the revelation of widespread Russian war crimes, the conflict has the capacity to politically split the EU into countries in favor of or opposed to more aggressive anti-Russia actions and an immediate energy import embargo.

The EU needs to show it is willing to bear the economic costs of countering threats to shared European interests.

As the evidence of war crimes in Ukraine increases, however, the argument of EU members like Germany that the short-term economic costs of an energy embargo are too high rings ever shallower. Estimates of the negative impact of much higher energy prices from an embargo against Russia do not point to imminent economic disaster, but rather at worst to a possible brief contraction—one of the kind that EU fiscal and monetary policy could easily counter.

This would complicate the short-term outlook for the European Central Bank and member-state central banks on inflation. It would have fiscal costs and would likely not cause the sudden end of fighting in Ukraine. But an immediate energy embargo would show that the EU is able to act decisively on an issue of strategic common European interest, despite its uneven economic costs to member states. This would represent a new degree of EU crisis capacity, embodying its strategic autonomy to take actions under political and economic pressure from outside forces. It would also send the strongest possible signal to other would-be aggressors around the world, notably a China contemplating a possible invasion of Taiwan. The EU needs to show it is willing to bear the economic costs of countering threats to shared European interests.