The sanctions regime slapped on Russia by the US and its allies continues to feature one glaring omission: an embargo on oil and gas, which accounts for nearly half of Russia’s export revenue.
When asked on Wednesday about sanctioning Russian oil exports, President Joe Biden said, “Nothing is off the table.” Biden faces mounting pressure from Senators like West Virginia Democrat Joe Manchin, who is partnering with Alaska Republican Sen. Lisa Murkowski on a bill that would ban the import of Russian oil.
While an oil and gas embargo would help cripple Russia’s financial resources, the nation’s “stranglehold” on the Western energy supply may prove too damaging for the US and its allies, says Bill Browder, an asset manager who for years specialized as an investor in major Russian firms, including the state-owned natural gas giant Gazprom.
Browder told Yahoo Finance he supports an embargo but understands the reluctance from countries reliant on Russian energy.
Russian President Vladimir Putin “kind of has us in a stranglehold, which is why the energy sector has been more or less left untouched,” says Browder, the CEO of Hermitage Capital Management and a longstanding critic of Putin.
“It’s going to be hard — it’s going to be a tough balancing act — because 40% of German households rely on Russian gas, 100% of Italian households, 100% of Australian households,” he adds.
Even in the absence of an embargo on Russian oil and gas, prices have spiked in recent days. U.S. oil prices on Wednesday surged to their highest level in over a decade, as the global benchmark Brent exceeded $113 per barrel.
After Biden expressed an openness to sanctions on Russian oil on Wednesday, the administration seemed to minimize the likelihood of such a move. “We don’t have a strategic interest in reducing the global supply of energy,” principal deputy press secretary Karine Jean-Pierre told reporters, according to a report from CNN.
She added that sanctions “would raise prices at the gas pump for Americans,” something that the White House is “very aware of.”
Despite reluctance to sanction Russian oil exports, the U.S. and its allies have taken steps to damage the long-term prospects of Russia’s energy sector. Germany halted certification of the Nord Stream 2, a 750-mile natural gas pipeline that would connect the two nations.
Plus, the U.S. unveiled new export curbs that will target oil refining technology headed to Russia, Reuters reported on Wednesday.
“Now you’re going to see massive accelerated strategic diversification going on,” Browder says.
“You can’t make a decision and say, ‘Tomorrow we’re going to buy gas from the Qataris,'” Browder says. “You need ports and pipelines and all sorts of other stuff.”
In the late ’90s and early 2000s, Browder’s firm delivered strong returns by exposing corruption at major Russian companies, bringing about company shake-ups, and boosting share prices. In 2005, Browder was denied re-entry to Russia and later became the victim of a Russian government scheme to undermine his firm, he says.
Sergei Magnitsky, a lawyer hired by Browder to investigate Russian corruption, was arrested and died in Russian custody.
Speaking to Yahoo Finance, Browder explained why an oil and gas embargo aligns with the primary goal of sanctions on Russia.
“The main reason that we’re doing any of this stuff is to deplete his resources, so he doesn’t have the finances to continue his military expansion,” he says.
“Therefore, if that’s the objective, then we should cripple any resource he has that generates cash,” he adds.