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Skyrocketing oil prices combined with an enormous appetite for fuel around the world mean that Russia has been raking in even more money from the sale of crude than it did before the war, despite selling at a discount.
After weeks of tense negotiations, the European Union agreed last month to largely ban the import of Russian oil by the end of this year as well as prohibit European countries from insuring tankers carrying Russian oil. But so far the question of whether to ban Russian gas — which is much harder to find a substitute for than oil — has been off the table. Germany’s government and industrial leaders have warned that a gas embargo would be catastrophic for its economy.
Talking about the sanctions rollout, Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics in Washington, said the buildup of pressure on the Russian economy “is going as planned.” He added that “if there’s any surprises, it’s how coherent the policy coordination has been across the Atlantic and East Asian countries.”
The various alliance members have been casting about for ways increase the penalties one notch at a time. The gold ban “gives the governments of the G7 some runway and the opportunity to ramp up,” said Andrew Shoyer, a lawyer at Sidley who advises companies on compliance with sanctions.
The Russia-Ukraine War and the Global Economy
A far-reaching conflict. Russia’s invasion on Ukraine has had a ripple effect across the globe, adding to the stock market’s woes. The conflict has caused dizzying spikes in gas prices and product shortages, and has pushed Europe to reconsider its reliance on Russian energy sources.
The distinction between newly mined and refined gold, and gold that was exported or purchased before the ban, is in line with the sanctions framework that prohibits new investment in Russian companies while permitting existing investments, Mr. Shoyer said.
The new ban is also aimed at depriving Russia of additional revenues earned from exporting gold, which is used for jewelry, in some industrial processes and for investment. As is often the case during crises, the purchase of gold for investment jumped after the coronavirus pandemic started upending the global economy. Investors expect it to retain its value. Central banks, including the Federal Reserve, had bought Russian gold through intermediaries.
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