Sanctions

Sanctions on Russia are on a collision course with Europe’s green ambitions

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These days, Europe is seen as the weak link in the developed economic world. The European stock market is underperforming its US rival, down 22 percent year-to-date. Even risky emerging markets are doing better. Likewise, Europe’s surging inflation rates, in countries like Germany and Spain (not to mention what the UK is going through), are worse than it is in Mexico.

What is the primary policy culprit for all this economic woe? Most of all this is due to European sanctions on Russian energy as punishment for its aggression in Ukraine. That’s by far the most significant headwind. These sanctions have set off a massive commodity price spike that’s rebounded to damage the European economy.

Green zealots (and there are a lot of them in Europe) say that somehow all this economic misery is actually good for the continent because by abandoning Russian oil and gas, European Union leaders are signaling to its member states and its people that it is boldly moving into a post-fossil fuels world. Ursula von der Leyen, the out-of-her-depth EU Commission president, grandly describes the move beyond fossil fuels as Europe’s moon mission.

But all this utopian fervor hits the skids the moment reality intrudes, for facts are stubborn things. Punchy revolutionary rhetoric won’t turn Europe away from fossil fuels. Instead, ironically, the continent is being forced to return to coal to make up for the energy shortfall as a result of giving up Russian gas, merely to keep the lights on over the coming winter. Yes, coal is back in climate-purist Europe.

The Greens – the second in command in the ruling German coalition and occupying the pivotal Economic and Foreign Ministries– have been dragooned by reality into using more coal, a fatal sin in their climate change religion. This month’s ban on Russian coal just means Germany will simply get it from elsewhere. And the place to make up the difference is with their old American allies.

U.S. coal exports to Europe rose more than 140 percent in May compared to a year earlier — and they are continuing rising at that stratospheric level because Europe desperately needs coal for electricity generation to replace Russian gas. By October, U.S. coal shipments will need to grow far higher than they already are just so enough coal will be available in Europe to keep the heat on by winter, says the U.S. Coal Exports Coalition, part of the National Mining Association.

Despite all the endless nattering about climate change and the Paris Accord getting re-signed by the Biden Administration in his first year in office, the world’s biggest polluters are also not falling in line with Europe’s utopian green agenda, given the raging global energy crisis. For example, India, not wishing to commit economic suicide, said it would delay coal power plant closures recently to maintain low energy costs. This makes perfect policy sense. But to put it mildly, it is not music to the ears of Europe’s green elite.

At the big picture policy level, it is now painfully obvious that energy sanctions on Russia have boomeranged, proving to be a disaster for European commodity prices, fueling the continent’s cost of living crisis, through the law of unintended consequences. On the other side of the ledger, the increase in global energy prices that the sanctions have brought about have led to an unbelievable increase in Russia’s energy export earnings, up a whopping 22 percent in the year to date, as at the end of September. Surely, this is not what the West initially had in mind.

It is time to take a deep breath and actually think in realist terms. Some sanctions placed on Russia are good and serve western interests, but others, clearly, do not. But it has become something of a political nightmare – once the sanctions are in place, which leader could justify rolling them back? In a rush to appear at the front of the pack, many sanctions were slapped on private companies vital to the global economy without a second thought for the unintended consequences.  

Instead, the West has shot itself in the foot on energy, done great harm to climate change initiatives, and risks rising global food prices due to fertilizer production limits, and sky-high energy prices.

At the world market level, there is little doubt that the demand for coal will continue to grow, while the economic reality energy sanctions have unleashed mean that the green agenda in the European Union has been pushed into the background. The massive expansion of renewables is currently mainly on paper – while the increasing hunger for energy today is real.

This piece was originally published in City A.M.

Don’t let Venezuela walk between the raindrops

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As best I can tell, the American novelist W.E.B. Griffin popularized the phrase “walk between the raindrops” that means a person (or country) is not held accountable for nefarious actions. It is one of my favorite political risk quotes, since all too often in this mediocre age — and in defiance of how republics are supposed to work — the mediocre and even the evil prosper, despite their horrendous “call record” in life.

Presently, the distracted, confused Biden administration is letting the thuggish, inept Venezuelan administration of Nicolas Maduro walk between raindrops. The White House has allowed the gradual removal of sanctions on Caracas to give America’s enemies real hope that they can withstand the economic pressure the U.S. heretofore has brought to bear. At literally every level, this amounts to a disastrous policy. As Edmund Burke is (wrongly) supposed to have said, “All that it takes for evil to triumph is for enough good men to do nothing.”

The Trump administration, and many other Western countries, withdrew diplomatic recognition of Maduro’s socialist, anti-American regime after his obvious rigging of Venezuela’s 2018 presidential campaign. For the past five years, the U.S. instead has recognized Juan Guaido as president and put in place punishing financial and personal sanctions directed against the country’s criminal elite, all the while supporting the domestic democratic opposition, in an effort to topple the former bus driver turned dictator.

However, in March, the Biden administration began to lose its nerve. U.S. officials traveled to Caracas to meet with Maduro and his team. The trigger for change was the Russian invasion of Ukraine and the energy crisis that followed. Venezuela, for all its economic problems, sits atop the world’s largest supply of oil. For the desperate Biden administration, being politically destroyed by its tone-deaf response to the energy and cost-of-living crises, and facing an uphill battle in the November midterms, the temptation to try to bring pariah Venezuela back on line to pump more oil is proving too great to pass up.

After the meeting, as a gesture of goodwill, Maduro freed two U.S. prisoners held in his country’s overflowing jails and promised to restart the perennially fruitless talks he has held with the opposition (he uses the negotiations as a diplomatic weapon to forestall any meaningful political change in the country). President Biden predictably fell for these token gestures, entranced by the fool’s gold of bringing energy-rich Venezuela back into the community of nations. Duly, the U.S. lifted some minor sanctions on Caracas, but the larger message is clear: The White House is open to letting Maduro walk between the raindrops, if the price is right.

There is no doubt the anti-American chavista president is a menace to his own people and the wider world. Despite Venezuela’s oil reserves, Maduro’s socialists have so mismanaged the country’s economy that three-quarters of its people live in extreme poverty — that is, on less than $1.90 a day. It is little wonder that 6 million Venezuelans have voted with their feet, fleeing the economic Dumpster fire in the past few years.

At the international level, Maduro has been similarly vicious and inept. He has been accused by U.S. officials of conspiring to flood the U.S. with cocaine, using the drug trade as a blunt instrument against America. Geopolitically, in line with his mentor, the populist leftist Hugo Chavez, Maduro has aligned himself with America’s rivals, China and Russia — an obvious strategic no-no in the Western Hemisphere.

What has transpired at the country level has been mirrored by peculiar goings-on at the individual level by chavista criminals. For example, Roberto Enrique Rincon-Fernandez, a Venezuelan chavista who improbably now lives in opulence in Houston — with his $5.8 million estate, a Ferrari and a Lamborghini, a private jet, and other houses in Aruba and Spain — was arrested in 2015, with the Department of Justice (DOJ) bringing 13 bribery charges against him.

The centerpiece of the DOJ’s broader investigation into corruption in Venezuela, Rincon has pleaded guilty to “oil bribery,” masterminding and participating in bribery schemes involving three high officials with the country’s national oil company, Petróleos de Venezuela (PDVSA). This malfeasance led to rigging bids in order for Rincon to win contracts supplying energy equipment to PDVSA, according to U.S. officials.

In 2016, Rincon accepted a plea bargain wherein he pled guilty to three of the DOJ cases against him. This ridiculously lenient deal took his estimated jail time down from a maximum of 100 years to 13. Better still for Rincon, he was released on $5 million bail and has had his sentencing postponed 20 times, most recently to August 2022. If this is not walking between the raindrops, it is hard to think of what is.

The moral problem of letting countries and individuals off the hook for their bad behavior is that they are likely to be encouraged in following their anti-American ideology, come hell or high water. The U.S. was right to impose some sanctions on Russia, which is a second-order U.S. problem in terms of its national interests. Why should it do less with Venezuela, sitting as it does in the Western Hemisphere, which, since the Monroe Doctrine, is the definition of a primary American interest? 

No, the Biden administration letting Venezuela walk between the raindrops corrodes an American foreign policy desperately in need of clarity. 

This post was originally published in The Hill.