Governmental Influence

Regarding the most recently announced economic sanctions by the U.S. and other countries on Russia, in response to its invasion into Ukraine, what goal and objectives are these sanctions serving? How effective do you expect these sanctions to be? Why is the energy sector largely spared? Will that spare on energy sector be a large loophole making the sanctions less effective?

These sanctions aim to hurt Russia to the point where they are forced to discontinue their pursuit of overtaking Ukraine. Rather than utilizing a wide-ranging sanction (i.e., comprehensive sanction), Europe's general reliance on Russian fossil fuels alters sanctions to take a targetted approach. Those nations imposing the targeted sanctions aim to minimize the effects on their general populations- the most significant impact is no energy supply. Specifically, banned are (most) financial transactions, with exceptions to those affecting energy and some agriculture. It's important to note that Russia supplies approximately 40% of Europe's natural gas, so this is a significant trade relationship that cannot be ignored, even amidst an attempted genocide of a nation. The situation is complex. European nations, specifically Germany, have a deep-rooted reliance on trade with Russia, which allows Putin's regime the opportunity to pursue Ukraine. In this scenario, targeted sanctions will not work, as it doesn't put enough pressure on Russia to cease the war.

What's the consequence of such economic sanctions on U.S. consumers, companies and tax payers? Will these economic sanctions lead to reduced oil and agricultural production and exports by Russia? When oil and food prices increase, who's paying the cost and who is benefitting? Are economic sanctions a win-lose zero sum game? Or a lose-lose negative sum game?

The U.S. is currently experiencing a new tax- the pursuit of corporate greed tax. What do I mean by this? In February, domestically, we began seeing prices at the pump increase. The Russian-Ukrainian war was the "cause" of this increase. Only one issue with the explanation, the U.S. does not rely on Russian natural gas. Moving forward to quarterly earning calls, we heard leadership within fossil fuel corporations boast soaring profits in all quarters of 2022. The consequence that the U.S. faces due to the war in Ukraine is the opportunist greed of domestic corporations. The U.S. imposed sanctions, which indirectly caused this corporate greed.

The oil is mostly going to European nations. Due to the reliance on oil (and some agriculture), European countries used targeted sanctions against Russia to mitigate disruption to their citizens' daily lives. Because of these exceptions within the sanctions, Russia's oil and agriculture production (and exports) will not be drastically affected.

It appears that whenever sanctions are levied in any way, it is always the consumer of the affected good/service that will pay more in the end. They are losing as their governments engage in trade sanctions. For this reason, I believe, in a general sense, that trade sanctions are a lose-lose negative sum game. However, in this scenario, if Russia was not such a critical (energy) trade partner to its EU neighbors, I believe a comprehensive sanction would be effective. Ukraine's allies would be able to band together to figure out how to take on some financial burdens to safeguard Ukraine from a crazed Putin regime. Much like the U.S. taxed itself after World War II to help rebuild Europe.