“Russia controls 4 percent of global cobalt production, for example, and 11 percent of nickel production. Following the sanctions package dropped on Russia, cobalt’s price increased from $74,000 per ton to $82,000 per ton and has now more than doubled since the start of 2021. Nickel’s price, meanwhile, has zoomed since the beginning of March, rising from $25,000 per ton on March 1 to a high above $45,000 briefly before settling at $32,000. Since 2019, the price of nickel has nearly tripled.
Shortages and price rises in those commodities will stymie any transition from carbon-emitting combustion engines to electric cars, since the average electric car battery contains 80 pounds of nickel and 15 to 30 pounds of cobalt. Increased gas prices due to a Russian oil collapse would not necessarily increase the adoption of green energy programs because electric cars, solar panels, and wind turbines all use nickel and cobalt to varying degrees. The rising costs of nickel and other inputs will very likely cause electric vehicle batteries, which were growing rapidly less expensive over the last decade, to stop getting more affordable until at least 2024.
Reduced access to Russian commodities will drive up the cost of renewables and electric vehicles as gas prices also increase. It’s easier to increase oil production than it is to increase nickel or cobalt production; America has at least 35 billion barrels of proven oil reserves and OPEC can increase oil production whenever it wants. Pumping more oil is a faster and less arduous process than building a new nickel mine.
But the U.S. has another available source of nickel and cobalt that could be counted on when countries on the other side of the world have production difficulties due to war or internal strife, and it’s a scant 90 nautical miles off the coast of Florida.
Unfortunately, this source happens to be Cuba, and American companies have been forbidden by law to do business with Cuba for most of the last 60 years.”
“The 2014 penalties were narrower in scope and failed to deter Putin from further land grabs. Now, administration officials say they learned key lessons. Among them: They needed to share more information with the Europeans in advance and to work together on aligning their reaction for maximum impact.
“We were more resistant to doing that in the [Obama] administration, for all the obvious reasons of trying to protect sources and methods,” a senior Treasury official said about intelligence sharing. “But being able to do that, to find a way to get the information to our friends and allies, was critical.”
That strategy was made easier by the fact that Biden administration officials now overseeing sanctions became thoroughly familiar with the nuance of sanctions policy during Russia’s last military campaign and developed extensive relationships with their European counterparts.”
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“The U.S. took pains to carve out Russian energy as much as possible from the punishment, in part because any direct actions focusing on oil could result in higher global prices — and thereby even help the Russians, but also in recognition of Europe’s dependency on Russian oil and gas. U.S. officials also worked with allies and major natural gas producers to ensure that Europe would have adequate energy supplies if Putin decided to cut off shipments that flow through Ukraine.”
“The latest package would issue sanctions on two major Russian banks and on the country’s sovereign debt, meaning it can no longer raise money from the West and trade new debt on U.S. or European markets, the president said. Starting tomorrow, the U.S. will also impose sanctions on Russian elites and their family members, he added.
Biden called the moves “the first tranche” of punitive measures the U.S. is prepared to take, and he said they would go far beyond the steps the U.S. and its allies took in response to Russia’s invasion of Crimea in 2014.
“This is a flagrant violation of international law, and it demands a firm response from the international community,” he said of Putin’s decision to send Russian forces into the territories.
Biden also said the U.S. would continue to provide defensive assistance to Ukraine in the meantime, and said he has authorized additional movements of U.S. forces and equipment already stationed in Europe “to strengthen our Baltic allies — Estonia, Latvia and Lithuania.””
“Why is it so difficult to convert America’s economic heft into geopolitical power? When it comes to sanctioning Russia, the U.S. faces three recurring challenges: The sanctions tend to be imposed gradually; they are negotiated with reluctant allies; and the most impactful ones would also be economically costly to the West. As a result, the Russia sanctions in place today are a watered-down compromise, designed to placate allies and minimize domestic costs.
Bending Russia’s macroeconomic fortunes — and Putin’s calculus — will require targeting the country’s financial system as well as key exports such as oil. Such sanctions would have significant effects on Russia’s economy and perhaps on the global financial system, which is why U.S. officials have been hesitant to go this far. But averting a war is a tall order and, unfortunately, won’t be cost-free. “Smart” or “targeted” sanctions won’t work. To really impose pain on Russia, the U.S. and Europe will have to bear some burden, too — although, fortunately, there are ways to minimize the fallout for Western economies.”
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“There are two main categories of sanctions that stand a chance of actually changing Putin’s mind — and each comes with downsides that the U.S. needs to consider seriously. First, the United States could threaten to cut off major Russian banks from the U.S. financial system. Blacklisting a major Russian bank, such as Sberbank, VTB or Gazprombank, would make it difficult — if not impossible — for anyone in the world to transact with it.
The Treasury Department has deep experience imposing sanctions on foreign banks, having done so repeatedly against Iran. The largest Russian banks are much bigger than their Iranian peers, which has given U.S. officials pause about sanctioning them in the past. Indeed, this would cause substantial financial distress in Russia. Full-blocking sanctions on Sberbank would be particularly impactful, since most Russians have an account there. Russia’s government would have to step in to bail out the bank and would struggle to prevent a domestic financial crisis. Companies would slash investment. The ruble would fall sharply against the dollar, but it would become riskier to hold dollars in Russian banks. Russian inflation would spike higher and real incomes would fall.
The impact would also be felt internationally. Many Western investment funds own Sberbank stocks and bonds, the value of which would slump.”
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“Second, the U.S. could substantially reduce Russia’s export revenues. Russia’s biggest export is oil (around 45 percent of exports), and other exports the U.S. could sanction include gas, coal and various iron and steel products. With Iran, the United States drastically cut the country’s oil exports by allowing Iran’s customers to gradually wind down purchases over time. A similar campaign is possible against Russia, though since Russia exports more oil than Iran, global oil prices would take a bigger hit. (Other countries would eventually increase production to make up for the shortage, but there would be a time lag during which oil prices would remain high.)
The United States could also sanction Russia’s natural gas exports, though this carries even greater tradeoffs. The world — especially Europe — already faces natural gas shortages this year. Energy-intensive European industries, notably in Germany, could face shutdowns if Russian gas supplies were halted. Given the Biden administration’s struggle with spiking energy prices and worsening inflation, it’s not hard to see why Washington may be reticent to impose such sanctions.”
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“Russia may have the advantage on the battlefield in Ukraine, but the West has vast power over Russia’s economy. It should be prepared to use it — and also be prepared for the costs.”
“Top Senate Democrats have long opposed a Russian natural gas pipeline that’s set to enrich Vladimir Putin. But those lawmakers are putting those concerns aside to back up President Joe Biden as he navigates increasingly precarious talks with Moscow.
Democrats have consistently supported sanctions on the Nord Stream 2 pipeline, arguing that the project will jeopardize Europe’s energy security and allow Putin to blackmail his enemies. But as the Senate prepares to vote next week on legislation from Sen. Ted Cruz (R-Texas) that would force Biden to impose those sanctions, Democrats on Wednesday signaled a significant shift in their posture.
The reason, Democrats say, is that they don’t want to undermine Biden while he engages with Russia over its military buildup on the border with Ukraine. As Putin flirts with an invasion of the U.S. ally, Democrats argued Cruz’s legislation would undercut Biden as he seeks to project unity with European allies — and would remove a key leverage point in the talks.”