Simon Pirani  Russia’s monthly revenues from oil exports rose by $1.7 billion to $15 billion in April, the International Energy Agency reported this week.

18-May-2023
The combination of shipments to China and India, which are taking about 80% of Russian oil, and of sanctions-avoiding tricks by European and other shipping companies, means that the western powers’ price cap on Russian oil is causing few problems.

The IEA’s monthly Oil Market Report showed that in March, Russian oil exports were at 8.1 million barrels per day (bpd), their highest level since April 2020. In April they went up even further, to 8.3 million bpd.

School students march with Fridays for Future Germany, in a joint action with public
transport workers demanding action on climate change, and collective bargaining
rights and investment in public transport, on 3 March 2023.
Photo from 
FFF Germany twitter feed
What is going on, 15 months after Russia’s murderous full-scale invasion of Ukraine?

In this article – based on a talk I gave at the Berlin School of Economics and Law last week – I look at (i) the background, (ii) oil and sanctions, (iii) gas and the Kremlin’s self-sanctioning, and (iv) what this all means in terms of cutting fossil fuel use and climate policy.

1. Background

The character of the war

To understand the economic aspects of this biggest military conflict in Europe since the second world war, we need to understand its political character.

The primary target of the Russian military operation is Ukraine’s civilian population – and, to underline this, it’s worth summarising the main points from the Organisation for Security and Cooperation in Europe’s Office for Democratic Institutions and Human Rights interim report (December 2022).

The actions by the Russian Federation that “may amount to war crimes and crimes against humanity” included:

➤ “Repeated and apparently indiscriminate strikes in densely populated areas using explosive weapons with wide area effects, resulting in widespread civilian death and injury”;

➤ “Devastating and intensified attacks reportedly carried out against civilian infrastructure, […] resulting in high numbers of civilian casualties and loss of access to critical infrastructure for millions”.

➤ In the administration of occupied territories, “abuses […] such as unlawful killings, abductions, kidnapping and other forms of arbitrary deprivation of liberty, […] enforced disappearances as well as torture, ill treatment and conflict-related sexual violence”; plus “unlawful forcible transfers and deportations of civilians […], including children”.

The report also says that “the Ukrainian armed forces have, on a much smaller scale, failed to comply with International Humanitarian Law rules on the conduct of hostilities”, especially by using explosive weapons in densely populated areas, and have committed human rights law abuses “although much more limited in scope”, including unlawful killings and arbitrary arrest and detention, particularly of people alleged to have collaborated with the Russian authorities.

The way the war is fought tells us something about its political purpose. It is motivated by a resurgence of the most reactionary type of imperialist nationalism.

The Kremlin sometimes claims that Ukrainian resistance to the Russian invasion is a “proxy war for NATO”, and this is sometimes repeated by some people on the political “left” in Europe.

This argument makes invisible the fact that Ukrainian society as a whole – and not just the army and the state – has mounted resistance. The population is not just a victim but an actor.

President Putin stated before the invasion that Russian troops would be greeted with flowers, and that did not happen. This is probably the main reason for the failure of the Russian war effort.

The Ukrainian population and the Ukrainian state have a right to defend themselves from this imperialist assault, and to do so with arms, in my view. This principle applies, just as it does to Palestinians defending themselves from Israeli apartheid and to Irish people who in decades past who fought against British colonialism.

How we got into this situation

It makes sense to consider the war in the context of the post-Soviet period as a whole. In the 1990s, western capital saw the collapse of the Soviet Union primarily as an opportunity to expand its economic system into that space.

With regard to Russia: the western powers were happy for millions of people in Russia, Ukraine and across the former Soviet Union to suffer the disastrous effects of the 1990s slump, the biggest peacetime slump anywhere. But as Russia emerged from that, western policy was to turn Russia into a subordinate economic player in the world economy, an exporter of fossil fuels and other raw materials. It is still that today.

The western powers acknowledged and approved the transformation of sections of the old Soviet bureaucracy into oligarchic, kleptocratic capitalists. They sought neither direct ownership of Russia’s wealth, nor direct control over its political system. The oil, gas and metals companies by and large remained in Russian hands. And politically, the western powers worked not for the destruction of the Russian state, but to turn it into an ally they could work with.

The western powers, concerned by the chaos of the 1990s, welcomed the accession of Vladimir Putin to the presidency in 2000.

Putin centralised the state in two ways: by making the oligarchs pay more tax, and by seeing off the danger of fragmentation of the state by the murderous war in Chechnya. That war, and all the war crimes committed, were supported by the NATO powers. They saw Putin as a gendarme for capital in the post-Soviet space.

During the 2000s and the 2010s, the western powers’ relationship with the Putin government was strained, but remained largely one of partnership. Although Putin now says fear of NATO expansion is a justification for the war in Ukraine, the most important round of NATO expansion into eastern Europe was in 2004. Russia’s response was to assure the western nations of continued collaboration; between 1998 and 2014 the G7 was expanded to include Russia (i.e. it became the G8).

In accordance with this approach, when Russia invaded Georgia in 2008, the western powers did nothing. Their first reaction to Putin’s rising militarism was in 2014, and this was due less to his support for the separatist Donbas “republics” and more to the annexation of Crimea, since grabbing another country’s territory was seen as a threat to the global security order. Sanctions, even less effective than the 2022 sanctions were imposed.

And then the western powers turned a blind eye to Russia’s murderous intervention in Syria (2015-16) and its support for the Assad regime’s war on the Syrian population. (More about all this here.)

My conclusion is that Putin is a gendarme for capital who in 2022, ran out of control. He reacted to social unrest in the post-Soviet space – not only in Ukraine, but also in Belarus, Kazakhstan and Russia itself – by a turn to authoritarian nationalism. The result was the full-scale invasion of Ukraine in February last year.

Looking at capital as a global system, we need to ask whether the roots of the war, and the roots of the climate crisis, are entangled. I think they are.

The western powers were content for a kleptocratic type of capitalism to take root in Russia, because their priorities were to ensure that the raw materials kept flowing. At the same time, the measures proposed by scientists in 1992 when the Rio treaty was signed were ignored, as neoliberalism became dominant in the USA and the international financial institutions, and a new round of capital accumulation raged. (I wrote more about this here.)

War and economic crisis

The war has exacerbated the economic crisis that dates back to 2008-09 and was reignited by the Covid-19 pandemic.

The Ukrainian economy has suffered a series of terrible blows. In 2022, it suffered a 32% contraction of GDP. Massive damage has been done to infrastructure. The Russian economy has been turned into a war economy. Russia’s finances are relatively healthy, due to the high price of oil. But its isolation from the world economy is taking its toll both on the living standards of ordinary people, and on industries reliant on foreign technology and foreign investment, e.g. motor car manufacture, computers etc. It will take years to recover, in the best case. (Good analysis here.)

But the war has also caused economic shocks more widely.

The effect of inflation, and the reduction in grain and fertiliser exports from both Russia and Ukraine, has contributed to the crisis of food supply in the Middle East and North Africa especially. “Many vulnerable countries still face heightened food insecurity”, an International Monetary Fund analyst said.

And while the poor have been hit hard, many of the rich have got richer. A recent survey of the oil exporting Gulf states by the Economist showed that – after a year of monster windfall profits – their current-account surpluses, aggregate, in 2022 were two-thirds of a trillion dollars. The survey showed that they are currently looking for assets to buy internationally with this money.

So we need to see this as a series of inter-related crises: the economic crises that started in 2008-09, the pandemic, climate crises and now war. This is the crisis of capital, which has become so completely dominant.

2. Oil and sanctions

In response to Russia’s invasion of Ukraine, the western powers decided that Russia needed to be put in its place, and saw sanctions as one way to do that. But it is very clear (i) that they would still much prefer to control the Russian elite, not destroy it, and (ii) that they do not want to damage their own economies in the process.

To see how this works in detail, we can look at: the oil exports; western oil companies that worked in Russia; and the wider effect of sanctions, especially financial ones.

Oil exports

Right after the invasion of Ukraine in February last year, sanctions on Russian oil imports were imposed by the US and the UK, who always bought most of their oil elsewhere. The EU, which relies much more heavily on Russian oil, sanctioned seaborne imports from December last year, and oil products from February this year.

The main effect of these measures was that Russian crude oil exports switched to Asia. China became the biggest importer of Russian crude oil, replacing the EU; India, which bought hardly any Russian oil before last year, is now a major buyer.

Along with the European ban on Russian oil products – which is a significant reduction in the EU’s trade with Russia – the G7 agreed to impose a price cap on Russian oil exports. After some argument, the price cap was set at $60/barrel, at a time when the average price of Russian oil was above $80/barrel.

This seems to have had two effects. First, Chinese and Indian buyers were able to negotiate big discounts with Russian sellers. Prices are often quoted in relation to the Brent crude price, an international marker; usually, the discount on Russian shipments would be a few percentage points; in December last year it rose, to up to 40% of the Brent crude price. Second, the sanctions rules are being broken repeatedly, with help from European-based shipping companies.

You might ask: why adopt such a complicated system in the first place? Good question.

In the autumn of last year, European governments had agreed on a simple rule, that no company would be allowed to provide financial services to vessels transporting Russian oil. This could have worked, because Europe completely dominates the international maritime insurance market.

But the US Treasury feared the effect on petrol prices of a sharp reduction in Russian exports. (When I said earlier that the western powers didn’t want sanctions to damage their own economies, this is the sort of thing I was talking about.)

So the USA persuaded the European powers to use the price cap instead, Global Witness reported. The USA also insisted that sanctions busting should not be punished too harshly.

The net result: sanctions on oil exports are cutting down the money flows into the Russian budget, but only slowly.

To quantify that. Straight after the invasion, oil prices shot up and although Russia lost some sales in overall terms it made a killing. Russia’s trade surplus with the rest of the world in 2022 was $370 billion, almost twice the 2021 level of $190 billion. The rise of $180 billion was two-thirds due to more export revenues, and one-third due to lower imports, which is another way that sanctions take effect.

Will oil export sanctions hurt the Russian budget this year?

The Centre for Research on Energy and Clean Air (CREA) estimates that Russian revenue from fossil fuel exports fell from €1130 million per day on 24 February 2022 to €560 million per day a year later. So yes, they will,. But that is in large part due to lower prices.

Moreover, the sanctions are not the only factor, or even the main factor, influencing those prices.

Earlier this year, oil was falling slowly from $85-90/barrel to below $80/barrel. But on 2 April, the OPEC+ group (an alliance of the main oil producing countries, of which the biggest are Saudi Arabia and Russia) decided to cut output. This measure tends to increase prices, and did so this time.

So the effect of sanctions on the Russian budget this year is still not clear. The Kremlin expects oil and gas revenues to fall this year to $119 billion, from $155 billion in 2022. From a Ukrainian point of view, that drop is not sharp enough.

Companies that work in Russia

So on one hand the western powers are clearly trying to manage the sanctions in such a way as to protect the oil market from too much disruption. On the other, straight after the invasion they collectively decided to stop investing in Russian oil production.

This was not a unanimous decision. Total Energies (France) has reduced its commitment to Novatek (gas company), but not pulled out of Russia. Schlumberger, the US-based oil services company, is expanding its operations in Russia. But ExxonMobil, BP, Shell, Equinor all announced in the first week after the invasion they were leaving; so did Halliburton and Baker Hughes oil services companies.

BP has the biggest problem, as it owns 20% of Rosneft, the biggest state-owned oil company. It has announced that it is valuing its share at zero, but can not sell it, because of the restrictions placed on such sales by the Russian government.

BP has not really suffered in terms of cash, though: it included a $24 billion loss in its annual accounts for 2022, but made so much money from high oil prices that that seemed like a minor problem. BP has, however, lost out in terms of reserves. Its total hydrocarbon reserves in 2022, without the Rosneft stake and other Russian projects, were less than half (42%) of what they were in 2021.

Western capital is divided. On one hand, senior business people are happy to mend fences, no matter how many dead bodies are lying on them. Siegfried Wolf, a board member of Porsche SE in Germany, was last month reported to have written to Putin, offering help in rebuilding the Russian car industry, which has been badly hit by sanctions.

On the other hand, Russian company assets have effectively been frozen by western courts (for example, Rosneft’s property in Germany) and the Kremlin is hitting back … albeit selectively.

Volkswagen has just sold its assets in Russia for €125 million, a bargain basement price. Shell seems to have done much better, netting a tidy $1 billion from the Kremlin-linked gas company Novatek, for its stake in the Sakhalin-2 oil and gas field – although the Russian government could still hold up the deal.

Hope lingers in capital, that new ways can be found to work with the Russian elite. If Bashar al-Assad can be welcomed back into their international fold, why not Putin?

Wider sanctions

Sanctions on oil exports are part of a wider set of policies that supposedly target the Russian government’s finances and the private companies closest to it. These financial sanctions, also, show that western policy is to discipline the Russian elite, not destroy it; and to limit any damage to western economies.

So, on one hand, a large chunk of the Russian Central Bank’s foreign exchange reserves were frozen straight after the invasion last year (about half of the $630 billion total), and many of the Russian banks sanctioned and effectively shut out of the international financial system. On the other hand, there are multiple avenues through which Russian money continues to find its way into that system.

In January this year, economists at the Bank of Italy published estimates that the Russian private sector “accumulated new foreign assets of approximately $100 billion”. This money went mostly to Europe and the USA in the first half of 2022, but much of it has since been moved on. (There was also a build-up of about $70 billion in Belgium: this was money stuck in an international securities depository, Euroclear, from sales of securities held in custody on behalf of sanctioned Russian people and companies, which could not be transferred back to Russia.)

This is not the end of the story, though. Many tens of billions of dollars has been stolen from the Russian, Kazakh, Ukrainian and other former Soviet economies over the last 20-30 years and been moved to offshore financial zones that have become a really central feature of the financial system during that time.

Svetlana Maniovich and her husband, Timur Ivanov, the Russian deputy minister of defence.
The Anti Corruption Foundation detailed how the EU and UK sanctions regimes have
allowed her to swan around Europe, spending hundreds of thousands of dollars over the last year.
Photo from 
Maria Pevchikh’s twitter feed

There are mountains of assets in western countries owned by companies and individuals based in these offshore zones, many of whom are surely Russian kleptocrats.

The UK, whose politicians shout most loudly about supporting Ukraine, is one of the main safe havens for this money.

The farcical ineffectiveness of UK sanctions is an excellent illustration of the way that Russian capital is integrated into a world system designed to protect wealth and power.

A law was introduced requiring foreign companies that own property in the UK above a certain value to register. The deadline was 31 January – and after that date, there were still more than 51,000 properties of which the owners were unknown. Many properties’ ownership shifted from companies in offshore locations (e.g. British Virgin Islands or Isle of Man) to individual persons. The UK authorities did not even fine the thousands of companies that broke this law.

➤ Journalists and non-governmental organisations have exposed these gaping loopholes. But, while British politicians go into paroxysms of fury against defenceless migrants, or XR demonstrators, they are content to allow economic crime to continue. Policing of it is severely underfunded; specifically, the National Crime Agency lacks resources. This is not an anomaly: it’s the class nature of the state.

➤ An example of the revolting leniency of sanctions on individual Russian officials was highlighted last month by the Anti Corruption Foundation, headed by Alexei Navalny, the jailed and tortured Russian opposition politician. It issued a report on Svetlana Maniovich, the wife of Timur Ivanov, Russian deputy minister of defence, showing how she regularly travels to Paris and London, spending hundreds of thousands of euros or pounds in shopping trips.

As insane as it sounds, she is totally allowed to come to the EU and walk up and down the Champs-Élysées spending the money her husband made by bombing apartment blocks, killing children and beheading soldiers in Ukraine.

This is one of many, many examples of the looseness of the sanctions regime.

This has to be explained not just politically, but by looking at the way capitalism works structurally, in my view.

3. Gas and “self sanctions”

Since the invasion of Ukraine, Gazprom, Russia’s state-controlled gas company, has reduced the flows of gas to European customers, including volumes that it is required to deliver under long-term contract. This course of action, which goes against all common sense and commercial logic, was surely ordered by the Kremlin for political reasons.

In 2021, while Russian troops were gathering on Ukraine’s borders, Gazprom did not re-fill its storage facilities in Europe as normal, contributing to a gas supply squeeze. Over the winter of 2021-22, it did not offer volumes on European spot markets. Prices rose.

After the full-scale invasion of Ukraine in February 2022, western sanctions were imposed on Russian oil, and the EU declared its intention of reducing dependence on Russian gas.

In response, Gazprom – following directions from the Kremlin – demanded payment for gas in rubles, despite contracts setting prices in dollars or euros. When purchasers failed to agree to this unilateral change of terms, volumes were reduced below the levels set out in the contracts.

Gazprom reduced flows through three of the four routes by which Russian gas gets to Europe; only the small proportion of exports via Turkey continued more or less as normal:

➤ Russia imposed its own sanctions on the Yamal-Europe pipeline through Poland.

➤ Gas has continued to flow through Ukraine, but in May last year the gas transmission company, GTSOU, said that due to war-related factors it was shifting flows from one entry point to another. Gazprom responded by suspending payments for transit; Naftogaz Ukrainy, the Ukrainian state oil and gas company, filed an arbitration claim – which, Gazprom said, could lead to Russian government sanctions on Naftogaz. That would end gas flows through Ukraine to Europe all together.

➤ Via Nord Stream, Gazprom’s major pipeline under the Baltic Sea to Germany, in June last year it reduced flows to less than half their usual level. In July, the pipeline stopped for its usual annual maintenance. Then, Gazprom retroactively declared “force majeure” – a statement to its trading partners that it was unable to deliver gas due to factors beyond its control. No further gas went through Nord Stream. This detail is important: the pipeline was actually empty when it was damaged by sabotage in September.

This “self sanctioning” – failing to provide gas, including volumes it was contractually obliged to deliver – was a spectacular act of self-harm, effectively destroying a business that Gazprom, and before it the Soviet ministry of oil and gas, had worked to develop since the 1980s.

It once again subordinated the interests of Russian business to the state’s military adventure. In pursuit of its military aims, the Kremlin is undoing many of the results of a couple of decades of attempts to work together.

Through the 2000s, political tension between Russia and Ukraine, exacerbated by the 2004 “Orange revolution” and other Ukrainian social movements, was accompanied by mounting economic tensions, including over the sale, and transit, of gas.

Nord Stream, first commissioned in 2010, was designed by Moscow as a means of getting its gas to its big German customers without transporting it through Ukraine. It was enthusiastically supported by the western powers.

In 2014, when the then-Ukrainian president Viktor Yanukovich was overthrown by the Maidan rebellion, and Russia intervened militarily to support the eastern Ukrainian separatists, Russia-Ukraine tensions mounted. Dormant plans to build a Nord Stream 2, which would double the pipeline’s capacity, were revived in 2015.

Germany supported this plan; western oil companies had shares in the project. But the western sanctions imposed after Russia’s annexation of Crimea, while half-hearted, were by 2017 sufficient to convince those companies to withdraw, or put the project at arm’s length.

Moscow, determined to reduce its reliance on Ukraine for gas transit, moved ahead with Nord Stream 2. In the USA, there was talk – but not much action – about preventing its completion, during the Trump presidency (2016-20).

By 2020 it looked as though Gazprom, by pressing on regardless, would complete the pipeline and produce a fait accompli that Germany would accept. When president Joe Biden arrived in the White House in 2021, his administration sought to draw a line under the issue. The US government, like Germany, was wary of Russia, but ready to compromise. In May 2021, the sanctions were dropped.

In July 2021 Germany, the US and Ukraine came to an agreement that, while the pipeline would go ahead, the western powers would provide funds for energy sector reforms in Ukraine. This agreement states:

Should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine, Germany will take action at the national level and press for effective measures at the European level, including sanctions, to limit Russian export capabilities to Europe in the energy sector, including gas, and/or in other economically relevant sectors. This commitment is designed to ensure that Russia will not misuse any pipeline, including Nord Stream 2, to achieve aggressive political ends by using energy as a weapon.

This was a logical continuation of the western powers’ approach: to contain, and use, the Kremlin – not to destroy it.

This compromise was shattered, by Putin, in February 2022. On 22 February, when he announced Russian recognition of the Donetsk and Luhansk “people’s republics”, the USA and Germany both considered this a repudiation of this agreement. Germany withdrew permission for Nord Stream 2, effectively nixing the project.

Russian gas could still reach Germany via Poland and Ukraine – but from May of last year, the Kremlin ordered Gazprom to run down supplies.

After the Nord Stream pipeline was sabotaged in September, many “left” politicians in western countries jumped to conclude not only that the USA was responsible (although there are other credible theories about who did it), but also that Washington had some commercial motivation (that blowing up the pipeline would open up market room for the US’s liquefied natural gas (LNG)).

This is a fairy-tale (as I argued here): the Kremlin had set about wrecking Gazprom’s European business months before the pipeline was blown up.

Thane Gustafson, an authoritative observer of Russian oil and gas politics since Soviet times, commented:

Why murder the milch cow? In the end, only one explanation is truly convincing: by early 2022, geopolitics had completely taken over Putin’s thinking. He clearly hoped that the resulting energy crisis would split Europe apart and give him a stronger hand in Ukraine. Indeed, in the near term, over the next two winters, he may turn out to be right. But the final result is clear; the Russian gas business in Europe, as we have known it for half a century. is dead.

4. European climate policy

When oil sanctions, and gas self-sanctions, crimped supplies to Europe last summer, governments declared an “energy crisis”, and responded by redoubling support for fossil fuels. They encouraged the investment of tens of billions into new non-Russian oil and gas production: nothing less than a disaster in terms of tackling climate change.

We must question the narrative about this “energy crisis”, and claims that “energy security” must be protected by these fossil fuel investments.

What actually happened last year? There was a sharp increase in wholesale gas prices, and a less sharp increase in oil prices, that resulted from the Russian invasion, the response of the western powers and the ensuing disruption.

The Adriatic LNG terminal, off the Italian coast. Photo: wikimedia commons
The consequences for people in the Middle East and North Africa were indeed serious. Not only did fossil fuel prices rocket up, but so did food and fertiliser prices. There were also sharp increases in retail prices of gas and electricity, especially in the UK – although there is plenty of evidence that there was a big element of opportunist profiteering there, that the electricity companies wanted to ensure that they, like the oil companies, made a big windfall profit.

But this was a short-term crisis of supply, exacerbated by the heavy dependence on Russian gas of industry and urban infrastructure of Germany and other central and east European countries.

It could have acted as a spur to altering fossil fuel consumption patterns, vital in any case to reduce greenhouse gas emissions and avert dangerous climate change.

Within weeks of the Russian invasion, research groups and NGOs, including Ember and Agora Energiewende, had produced detailed reports, showing how the shortfall in Russian gas imports could be met in this way.

They proposed a crash programme of insulation, electrification and installation of heat pumps in houses, where a large proportion of EU gas is consumed; changes in industrial consumption patterns; and a complete decarbonisation of the electricity network, i.e. the closure of all coal- and gas-fired power stations, by 2035.

None of these proposals were taken up by governments.

Instead, oil and gas producers made a dash for LNG: between September 2021 and October 2022, 16 new onshore terminals (with a capacity of 89 billion cubic metres (bcm)), and 22 floating regasification units (90 bcm) were commissioned. This capacity is equivalent to 116% of 2021 European gas imports from Russia.

Climate Action Tracker warned:

Such significant investments in fossil gas infrastructure, most of which will go online after the EU has had enough time to develop low carbon alternatives and invest in energy efficiency, are impossible to justify. […] These investments will either result in significant stranded assets or will threaten the EU’s emission reduction goals. To make matters worse, the EU and its member states are encouraging other countries such as Algeria, Angola, Azerbaijan, Egypt, Senegal and Congo to invest in fossil gas extraction.

A Greenpeace report accused gas companies of “capitalising on the shock of the Russian invasion of Ukraine to weaken [decarbonisation] regulations”, and to lock in 15-20 year LNG supply contracts. The proposed projects will not be operational in time to address the short term emergency: “most projects will only come on line by 2026, far too late to respond to the current supply crunch”. The US has approved projects that, if built, would double its gas export capacity to 439 bcm per year.

Just as extreme as the rush to LNG is the approval of new oil and gas production projects such as Rosebank (west of Shetland, the UK) and Willow (Alaska, the USA).

These projects are unlikely to start producing oil until after 2030, signalling these governments’ contempt for the UN bodies, and indeed the UN secretary general, who are saying that no new oil and gas developments should be contemplated if climate targets are to be met.

The UN Environment Programme Emissions Gap report 2022 is unequivocal:

Policies currently in place with no additional action are projected to result in global warming of 2.8 degrees C over the 21st century. […] Despite the call for countries to “revisit and strengthen” their 2030 targets, progress since COP 26 is highly inadequate.

That spells disaster.

Another aspect of European energy policy that deserves comment is the focus on hydrogen. While hydrogen might play a small role in future post-fossil-fuel energy systems, the political focus on it now is damaging – and amounts to a survival strategy for fossil fuel companies.

Governments are going along – and there is no clearer example of their twisted priorities than the bizarre, neocolonialist scheme to produce hydrogen from renewable electricity in Ukraine and export it. Hopefully Ukraine will expand its renewable electricity generation many times over in the coming years, but that electricity should in the first place be made available to the grid, to hasten the shutdown of coal-fired power stations and coal mining.

What to do?

Recognising the damaging role being played by the political process is on one hand very frightening, because it indicates that governments are indeed collectively creating a situation where global heating could reach dangerous levels during the 21st century.

That recognition must be a spur to action by society, outside of the political process in general, and outside the discourse around the international climate talks in particular, in my view.

It is significant that even in UN reports, and speeches by the UN Secretary General and prominent climate scientists, we are hearing talk of the need for deep-going change in society. In my view – although not necessarily in theirs – that change means confronting and breaking the power of capital. (I wrote more about this here.)

A starting-point for such action is for us all constantly to make the connection between this long-term global issue – climate change – and more immediate day-to-day ways in which capital inflicts hardship on the vast majority of people. Climate change is affecting the poorest people sooner and harder than others, and this is no accident. Tackling climate change really is a social justice issue.

We need to find ways to link the political fight for action on climate change to broader social justice issues.

In Europe, one of the most successful examples of such an alliance is the joint action by climate activists and public transport workers in Germany on 3 March. They brought together workers’ and passengers’ demands for better public transport with calls for more drastic decarbonisation efforts and curbing motor traffic.

Another issue in Europe is the obvious link between the inflated energy bills facing millions of households, and the potential for insulation and decarbonised heating. A crash programme to insulate homes and install electric heat pumps would permanently both cut the cost of domestic heating and slash the level of greenhouse gas emissions from heating systems.

Putting these issues at the fore is vital, because only big social movements, not activists however brave, will be able to confront governments and the interests of capital they represent.

That is not to decry the courageous efforts of those activists, whether those who took part in the protest at Lützerath, or thousands of others across Europe who engage in acts of civil disobedience. Those acts are necessary and I applaud them. They need to be seen as stepping-stones to a much wider movement.

5. Conclusions

➤ Putin is a creature of capital, not some sort of opposite to it. The western powers saw him as a gendarme of capital in the post-Soviet space, even after 2014.

➤ Last year, that gendarme, provoked by social movements across the post-Soviet space, ran out of control by launching the invasion of Ukraine; the western powers have reacted with sanctions, which are limited by their economic interests.

➤ Putin’s “self sanctioning” with gas is an important illustration of the way that imperialist nationalist ideology determines Russian policy, at the expense of economic management.

➤ If the US Democrats, and the EU leaders, were determined to tackle climate change, they would have taken the invasion as an opportunity to move economic policy more rapidly away from fossil fuels. They have done the opposite, and reinforced dependence on oil and gas.

➤ The long-term consequences of this approach to climate policy, implemented by governments that are bent on defending capital and social injustice, are extremely dangerous to us all. Society needs to oppose this with all the methods at its disposal.

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Western Capital, Warmonger Putin And The Climate Policy Disaster

Simon Pirani  Russia’s monthly revenues from oil exports rose by $1.7 billion to $15 billion in April, the International Energy Agency reported this week.

18-May-2023
The combination of shipments to China and India, which are taking about 80% of Russian oil, and of sanctions-avoiding tricks by European and other shipping companies, means that the western powers’ price cap on Russian oil is causing few problems.

The IEA’s monthly Oil Market Report showed that in March, Russian oil exports were at 8.1 million barrels per day (bpd), their highest level since April 2020. In April they went up even further, to 8.3 million bpd.

School students march with Fridays for Future Germany, in a joint action with public
transport workers demanding action on climate change, and collective bargaining
rights and investment in public transport, on 3 March 2023.
Photo from 
FFF Germany twitter feed
What is going on, 15 months after Russia’s murderous full-scale invasion of Ukraine?

In this article – based on a talk I gave at the Berlin School of Economics and Law last week – I look at (i) the background, (ii) oil and sanctions, (iii) gas and the Kremlin’s self-sanctioning, and (iv) what this all means in terms of cutting fossil fuel use and climate policy.

1. Background

The character of the war

To understand the economic aspects of this biggest military conflict in Europe since the second world war, we need to understand its political character.

The primary target of the Russian military operation is Ukraine’s civilian population – and, to underline this, it’s worth summarising the main points from the Organisation for Security and Cooperation in Europe’s Office for Democratic Institutions and Human Rights interim report (December 2022).

The actions by the Russian Federation that “may amount to war crimes and crimes against humanity” included:

➤ “Repeated and apparently indiscriminate strikes in densely populated areas using explosive weapons with wide area effects, resulting in widespread civilian death and injury”;

➤ “Devastating and intensified attacks reportedly carried out against civilian infrastructure, […] resulting in high numbers of civilian casualties and loss of access to critical infrastructure for millions”.

➤ In the administration of occupied territories, “abuses […] such as unlawful killings, abductions, kidnapping and other forms of arbitrary deprivation of liberty, […] enforced disappearances as well as torture, ill treatment and conflict-related sexual violence”; plus “unlawful forcible transfers and deportations of civilians […], including children”.

The report also says that “the Ukrainian armed forces have, on a much smaller scale, failed to comply with International Humanitarian Law rules on the conduct of hostilities”, especially by using explosive weapons in densely populated areas, and have committed human rights law abuses “although much more limited in scope”, including unlawful killings and arbitrary arrest and detention, particularly of people alleged to have collaborated with the Russian authorities.

The way the war is fought tells us something about its political purpose. It is motivated by a resurgence of the most reactionary type of imperialist nationalism.

The Kremlin sometimes claims that Ukrainian resistance to the Russian invasion is a “proxy war for NATO”, and this is sometimes repeated by some people on the political “left” in Europe.

This argument makes invisible the fact that Ukrainian society as a whole – and not just the army and the state – has mounted resistance. The population is not just a victim but an actor.

President Putin stated before the invasion that Russian troops would be greeted with flowers, and that did not happen. This is probably the main reason for the failure of the Russian war effort.

The Ukrainian population and the Ukrainian state have a right to defend themselves from this imperialist assault, and to do so with arms, in my view. This principle applies, just as it does to Palestinians defending themselves from Israeli apartheid and to Irish people who in decades past who fought against British colonialism.

How we got into this situation

It makes sense to consider the war in the context of the post-Soviet period as a whole. In the 1990s, western capital saw the collapse of the Soviet Union primarily as an opportunity to expand its economic system into that space.

With regard to Russia: the western powers were happy for millions of people in Russia, Ukraine and across the former Soviet Union to suffer the disastrous effects of the 1990s slump, the biggest peacetime slump anywhere. But as Russia emerged from that, western policy was to turn Russia into a subordinate economic player in the world economy, an exporter of fossil fuels and other raw materials. It is still that today.

The western powers acknowledged and approved the transformation of sections of the old Soviet bureaucracy into oligarchic, kleptocratic capitalists. They sought neither direct ownership of Russia’s wealth, nor direct control over its political system. The oil, gas and metals companies by and large remained in Russian hands. And politically, the western powers worked not for the destruction of the Russian state, but to turn it into an ally they could work with.

The western powers, concerned by the chaos of the 1990s, welcomed the accession of Vladimir Putin to the presidency in 2000.

Putin centralised the state in two ways: by making the oligarchs pay more tax, and by seeing off the danger of fragmentation of the state by the murderous war in Chechnya. That war, and all the war crimes committed, were supported by the NATO powers. They saw Putin as a gendarme for capital in the post-Soviet space.

During the 2000s and the 2010s, the western powers’ relationship with the Putin government was strained, but remained largely one of partnership. Although Putin now says fear of NATO expansion is a justification for the war in Ukraine, the most important round of NATO expansion into eastern Europe was in 2004. Russia’s response was to assure the western nations of continued collaboration; between 1998 and 2014 the G7 was expanded to include Russia (i.e. it became the G8).

In accordance with this approach, when Russia invaded Georgia in 2008, the western powers did nothing. Their first reaction to Putin’s rising militarism was in 2014, and this was due less to his support for the separatist Donbas “republics” and more to the annexation of Crimea, since grabbing another country’s territory was seen as a threat to the global security order. Sanctions, even less effective than the 2022 sanctions were imposed.

And then the western powers turned a blind eye to Russia’s murderous intervention in Syria (2015-16) and its support for the Assad regime’s war on the Syrian population. (More about all this here.)

My conclusion is that Putin is a gendarme for capital who in 2022, ran out of control. He reacted to social unrest in the post-Soviet space – not only in Ukraine, but also in Belarus, Kazakhstan and Russia itself – by a turn to authoritarian nationalism. The result was the full-scale invasion of Ukraine in February last year.

Looking at capital as a global system, we need to ask whether the roots of the war, and the roots of the climate crisis, are entangled. I think they are.

The western powers were content for a kleptocratic type of capitalism to take root in Russia, because their priorities were to ensure that the raw materials kept flowing. At the same time, the measures proposed by scientists in 1992 when the Rio treaty was signed were ignored, as neoliberalism became dominant in the USA and the international financial institutions, and a new round of capital accumulation raged. (I wrote more about this here.)

War and economic crisis

The war has exacerbated the economic crisis that dates back to 2008-09 and was reignited by the Covid-19 pandemic.

The Ukrainian economy has suffered a series of terrible blows. In 2022, it suffered a 32% contraction of GDP. Massive damage has been done to infrastructure. The Russian economy has been turned into a war economy. Russia’s finances are relatively healthy, due to the high price of oil. But its isolation from the world economy is taking its toll both on the living standards of ordinary people, and on industries reliant on foreign technology and foreign investment, e.g. motor car manufacture, computers etc. It will take years to recover, in the best case. (Good analysis here.)

But the war has also caused economic shocks more widely.

The effect of inflation, and the reduction in grain and fertiliser exports from both Russia and Ukraine, has contributed to the crisis of food supply in the Middle East and North Africa especially. “Many vulnerable countries still face heightened food insecurity”, an International Monetary Fund analyst said.

And while the poor have been hit hard, many of the rich have got richer. A recent survey of the oil exporting Gulf states by the Economist showed that – after a year of monster windfall profits – their current-account surpluses, aggregate, in 2022 were two-thirds of a trillion dollars. The survey showed that they are currently looking for assets to buy internationally with this money.

So we need to see this as a series of inter-related crises: the economic crises that started in 2008-09, the pandemic, climate crises and now war. This is the crisis of capital, which has become so completely dominant.

2. Oil and sanctions

In response to Russia’s invasion of Ukraine, the western powers decided that Russia needed to be put in its place, and saw sanctions as one way to do that. But it is very clear (i) that they would still much prefer to control the Russian elite, not destroy it, and (ii) that they do not want to damage their own economies in the process.

To see how this works in detail, we can look at: the oil exports; western oil companies that worked in Russia; and the wider effect of sanctions, especially financial ones.

Oil exports

Right after the invasion of Ukraine in February last year, sanctions on Russian oil imports were imposed by the US and the UK, who always bought most of their oil elsewhere. The EU, which relies much more heavily on Russian oil, sanctioned seaborne imports from December last year, and oil products from February this year.

The main effect of these measures was that Russian crude oil exports switched to Asia. China became the biggest importer of Russian crude oil, replacing the EU; India, which bought hardly any Russian oil before last year, is now a major buyer.

Along with the European ban on Russian oil products – which is a significant reduction in the EU’s trade with Russia – the G7 agreed to impose a price cap on Russian oil exports. After some argument, the price cap was set at $60/barrel, at a time when the average price of Russian oil was above $80/barrel.

This seems to have had two effects. First, Chinese and Indian buyers were able to negotiate big discounts with Russian sellers. Prices are often quoted in relation to the Brent crude price, an international marker; usually, the discount on Russian shipments would be a few percentage points; in December last year it rose, to up to 40% of the Brent crude price. Second, the sanctions rules are being broken repeatedly, with help from European-based shipping companies.

You might ask: why adopt such a complicated system in the first place? Good question.

In the autumn of last year, European governments had agreed on a simple rule, that no company would be allowed to provide financial services to vessels transporting Russian oil. This could have worked, because Europe completely dominates the international maritime insurance market.

But the US Treasury feared the effect on petrol prices of a sharp reduction in Russian exports. (When I said earlier that the western powers didn’t want sanctions to damage their own economies, this is the sort of thing I was talking about.)

So the USA persuaded the European powers to use the price cap instead, Global Witness reported. The USA also insisted that sanctions busting should not be punished too harshly.

The net result: sanctions on oil exports are cutting down the money flows into the Russian budget, but only slowly.

To quantify that. Straight after the invasion, oil prices shot up and although Russia lost some sales in overall terms it made a killing. Russia’s trade surplus with the rest of the world in 2022 was $370 billion, almost twice the 2021 level of $190 billion. The rise of $180 billion was two-thirds due to more export revenues, and one-third due to lower imports, which is another way that sanctions take effect.

Will oil export sanctions hurt the Russian budget this year?

The Centre for Research on Energy and Clean Air (CREA) estimates that Russian revenue from fossil fuel exports fell from €1130 million per day on 24 February 2022 to €560 million per day a year later. So yes, they will,. But that is in large part due to lower prices.

Moreover, the sanctions are not the only factor, or even the main factor, influencing those prices.

Earlier this year, oil was falling slowly from $85-90/barrel to below $80/barrel. But on 2 April, the OPEC+ group (an alliance of the main oil producing countries, of which the biggest are Saudi Arabia and Russia) decided to cut output. This measure tends to increase prices, and did so this time.

So the effect of sanctions on the Russian budget this year is still not clear. The Kremlin expects oil and gas revenues to fall this year to $119 billion, from $155 billion in 2022. From a Ukrainian point of view, that drop is not sharp enough.

Companies that work in Russia

So on one hand the western powers are clearly trying to manage the sanctions in such a way as to protect the oil market from too much disruption. On the other, straight after the invasion they collectively decided to stop investing in Russian oil production.

This was not a unanimous decision. Total Energies (France) has reduced its commitment to Novatek (gas company), but not pulled out of Russia. Schlumberger, the US-based oil services company, is expanding its operations in Russia. But ExxonMobil, BP, Shell, Equinor all announced in the first week after the invasion they were leaving; so did Halliburton and Baker Hughes oil services companies.

BP has the biggest problem, as it owns 20% of Rosneft, the biggest state-owned oil company. It has announced that it is valuing its share at zero, but can not sell it, because of the restrictions placed on such sales by the Russian government.

BP has not really suffered in terms of cash, though: it included a $24 billion loss in its annual accounts for 2022, but made so much money from high oil prices that that seemed like a minor problem. BP has, however, lost out in terms of reserves. Its total hydrocarbon reserves in 2022, without the Rosneft stake and other Russian projects, were less than half (42%) of what they were in 2021.

Western capital is divided. On one hand, senior business people are happy to mend fences, no matter how many dead bodies are lying on them. Siegfried Wolf, a board member of Porsche SE in Germany, was last month reported to have written to Putin, offering help in rebuilding the Russian car industry, which has been badly hit by sanctions.

On the other hand, Russian company assets have effectively been frozen by western courts (for example, Rosneft’s property in Germany) and the Kremlin is hitting back … albeit selectively.

Volkswagen has just sold its assets in Russia for €125 million, a bargain basement price. Shell seems to have done much better, netting a tidy $1 billion from the Kremlin-linked gas company Novatek, for its stake in the Sakhalin-2 oil and gas field – although the Russian government could still hold up the deal.

Hope lingers in capital, that new ways can be found to work with the Russian elite. If Bashar al-Assad can be welcomed back into their international fold, why not Putin?

Wider sanctions

Sanctions on oil exports are part of a wider set of policies that supposedly target the Russian government’s finances and the private companies closest to it. These financial sanctions, also, show that western policy is to discipline the Russian elite, not destroy it; and to limit any damage to western economies.

So, on one hand, a large chunk of the Russian Central Bank’s foreign exchange reserves were frozen straight after the invasion last year (about half of the $630 billion total), and many of the Russian banks sanctioned and effectively shut out of the international financial system. On the other hand, there are multiple avenues through which Russian money continues to find its way into that system.

In January this year, economists at the Bank of Italy published estimates that the Russian private sector “accumulated new foreign assets of approximately $100 billion”. This money went mostly to Europe and the USA in the first half of 2022, but much of it has since been moved on. (There was also a build-up of about $70 billion in Belgium: this was money stuck in an international securities depository, Euroclear, from sales of securities held in custody on behalf of sanctioned Russian people and companies, which could not be transferred back to Russia.)

This is not the end of the story, though. Many tens of billions of dollars has been stolen from the Russian, Kazakh, Ukrainian and other former Soviet economies over the last 20-30 years and been moved to offshore financial zones that have become a really central feature of the financial system during that time.

Svetlana Maniovich and her husband, Timur Ivanov, the Russian deputy minister of defence.
The Anti Corruption Foundation detailed how the EU and UK sanctions regimes have
allowed her to swan around Europe, spending hundreds of thousands of dollars over the last year.
Photo from 
Maria Pevchikh’s twitter feed

There are mountains of assets in western countries owned by companies and individuals based in these offshore zones, many of whom are surely Russian kleptocrats.

The UK, whose politicians shout most loudly about supporting Ukraine, is one of the main safe havens for this money.

The farcical ineffectiveness of UK sanctions is an excellent illustration of the way that Russian capital is integrated into a world system designed to protect wealth and power.

A law was introduced requiring foreign companies that own property in the UK above a certain value to register. The deadline was 31 January – and after that date, there were still more than 51,000 properties of which the owners were unknown. Many properties’ ownership shifted from companies in offshore locations (e.g. British Virgin Islands or Isle of Man) to individual persons. The UK authorities did not even fine the thousands of companies that broke this law.

➤ Journalists and non-governmental organisations have exposed these gaping loopholes. But, while British politicians go into paroxysms of fury against defenceless migrants, or XR demonstrators, they are content to allow economic crime to continue. Policing of it is severely underfunded; specifically, the National Crime Agency lacks resources. This is not an anomaly: it’s the class nature of the state.

➤ An example of the revolting leniency of sanctions on individual Russian officials was highlighted last month by the Anti Corruption Foundation, headed by Alexei Navalny, the jailed and tortured Russian opposition politician. It issued a report on Svetlana Maniovich, the wife of Timur Ivanov, Russian deputy minister of defence, showing how she regularly travels to Paris and London, spending hundreds of thousands of euros or pounds in shopping trips.

As insane as it sounds, she is totally allowed to come to the EU and walk up and down the Champs-Élysées spending the money her husband made by bombing apartment blocks, killing children and beheading soldiers in Ukraine.

This is one of many, many examples of the looseness of the sanctions regime.

This has to be explained not just politically, but by looking at the way capitalism works structurally, in my view.

3. Gas and “self sanctions”

Since the invasion of Ukraine, Gazprom, Russia’s state-controlled gas company, has reduced the flows of gas to European customers, including volumes that it is required to deliver under long-term contract. This course of action, which goes against all common sense and commercial logic, was surely ordered by the Kremlin for political reasons.

In 2021, while Russian troops were gathering on Ukraine’s borders, Gazprom did not re-fill its storage facilities in Europe as normal, contributing to a gas supply squeeze. Over the winter of 2021-22, it did not offer volumes on European spot markets. Prices rose.

After the full-scale invasion of Ukraine in February 2022, western sanctions were imposed on Russian oil, and the EU declared its intention of reducing dependence on Russian gas.

In response, Gazprom – following directions from the Kremlin – demanded payment for gas in rubles, despite contracts setting prices in dollars or euros. When purchasers failed to agree to this unilateral change of terms, volumes were reduced below the levels set out in the contracts.

Gazprom reduced flows through three of the four routes by which Russian gas gets to Europe; only the small proportion of exports via Turkey continued more or less as normal:

➤ Russia imposed its own sanctions on the Yamal-Europe pipeline through Poland.

➤ Gas has continued to flow through Ukraine, but in May last year the gas transmission company, GTSOU, said that due to war-related factors it was shifting flows from one entry point to another. Gazprom responded by suspending payments for transit; Naftogaz Ukrainy, the Ukrainian state oil and gas company, filed an arbitration claim – which, Gazprom said, could lead to Russian government sanctions on Naftogaz. That would end gas flows through Ukraine to Europe all together.

➤ Via Nord Stream, Gazprom’s major pipeline under the Baltic Sea to Germany, in June last year it reduced flows to less than half their usual level. In July, the pipeline stopped for its usual annual maintenance. Then, Gazprom retroactively declared “force majeure” – a statement to its trading partners that it was unable to deliver gas due to factors beyond its control. No further gas went through Nord Stream. This detail is important: the pipeline was actually empty when it was damaged by sabotage in September.

This “self sanctioning” – failing to provide gas, including volumes it was contractually obliged to deliver – was a spectacular act of self-harm, effectively destroying a business that Gazprom, and before it the Soviet ministry of oil and gas, had worked to develop since the 1980s.

It once again subordinated the interests of Russian business to the state’s military adventure. In pursuit of its military aims, the Kremlin is undoing many of the results of a couple of decades of attempts to work together.

Through the 2000s, political tension between Russia and Ukraine, exacerbated by the 2004 “Orange revolution” and other Ukrainian social movements, was accompanied by mounting economic tensions, including over the sale, and transit, of gas.

Nord Stream, first commissioned in 2010, was designed by Moscow as a means of getting its gas to its big German customers without transporting it through Ukraine. It was enthusiastically supported by the western powers.

In 2014, when the then-Ukrainian president Viktor Yanukovich was overthrown by the Maidan rebellion, and Russia intervened militarily to support the eastern Ukrainian separatists, Russia-Ukraine tensions mounted. Dormant plans to build a Nord Stream 2, which would double the pipeline’s capacity, were revived in 2015.

Germany supported this plan; western oil companies had shares in the project. But the western sanctions imposed after Russia’s annexation of Crimea, while half-hearted, were by 2017 sufficient to convince those companies to withdraw, or put the project at arm’s length.

Moscow, determined to reduce its reliance on Ukraine for gas transit, moved ahead with Nord Stream 2. In the USA, there was talk – but not much action – about preventing its completion, during the Trump presidency (2016-20).

By 2020 it looked as though Gazprom, by pressing on regardless, would complete the pipeline and produce a fait accompli that Germany would accept. When president Joe Biden arrived in the White House in 2021, his administration sought to draw a line under the issue. The US government, like Germany, was wary of Russia, but ready to compromise. In May 2021, the sanctions were dropped.

In July 2021 Germany, the US and Ukraine came to an agreement that, while the pipeline would go ahead, the western powers would provide funds for energy sector reforms in Ukraine. This agreement states:

Should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine, Germany will take action at the national level and press for effective measures at the European level, including sanctions, to limit Russian export capabilities to Europe in the energy sector, including gas, and/or in other economically relevant sectors. This commitment is designed to ensure that Russia will not misuse any pipeline, including Nord Stream 2, to achieve aggressive political ends by using energy as a weapon.

This was a logical continuation of the western powers’ approach: to contain, and use, the Kremlin – not to destroy it.

This compromise was shattered, by Putin, in February 2022. On 22 February, when he announced Russian recognition of the Donetsk and Luhansk “people’s republics”, the USA and Germany both considered this a repudiation of this agreement. Germany withdrew permission for Nord Stream 2, effectively nixing the project.

Russian gas could still reach Germany via Poland and Ukraine – but from May of last year, the Kremlin ordered Gazprom to run down supplies.

After the Nord Stream pipeline was sabotaged in September, many “left” politicians in western countries jumped to conclude not only that the USA was responsible (although there are other credible theories about who did it), but also that Washington had some commercial motivation (that blowing up the pipeline would open up market room for the US’s liquefied natural gas (LNG)).

This is a fairy-tale (as I argued here): the Kremlin had set about wrecking Gazprom’s European business months before the pipeline was blown up.

Thane Gustafson, an authoritative observer of Russian oil and gas politics since Soviet times, commented:

Why murder the milch cow? In the end, only one explanation is truly convincing: by early 2022, geopolitics had completely taken over Putin’s thinking. He clearly hoped that the resulting energy crisis would split Europe apart and give him a stronger hand in Ukraine. Indeed, in the near term, over the next two winters, he may turn out to be right. But the final result is clear; the Russian gas business in Europe, as we have known it for half a century. is dead.

4. European climate policy

When oil sanctions, and gas self-sanctions, crimped supplies to Europe last summer, governments declared an “energy crisis”, and responded by redoubling support for fossil fuels. They encouraged the investment of tens of billions into new non-Russian oil and gas production: nothing less than a disaster in terms of tackling climate change.

We must question the narrative about this “energy crisis”, and claims that “energy security” must be protected by these fossil fuel investments.

What actually happened last year? There was a sharp increase in wholesale gas prices, and a less sharp increase in oil prices, that resulted from the Russian invasion, the response of the western powers and the ensuing disruption.

The Adriatic LNG terminal, off the Italian coast. Photo: wikimedia commons
The consequences for people in the Middle East and North Africa were indeed serious. Not only did fossil fuel prices rocket up, but so did food and fertiliser prices. There were also sharp increases in retail prices of gas and electricity, especially in the UK – although there is plenty of evidence that there was a big element of opportunist profiteering there, that the electricity companies wanted to ensure that they, like the oil companies, made a big windfall profit.

But this was a short-term crisis of supply, exacerbated by the heavy dependence on Russian gas of industry and urban infrastructure of Germany and other central and east European countries.

It could have acted as a spur to altering fossil fuel consumption patterns, vital in any case to reduce greenhouse gas emissions and avert dangerous climate change.

Within weeks of the Russian invasion, research groups and NGOs, including Ember and Agora Energiewende, had produced detailed reports, showing how the shortfall in Russian gas imports could be met in this way.

They proposed a crash programme of insulation, electrification and installation of heat pumps in houses, where a large proportion of EU gas is consumed; changes in industrial consumption patterns; and a complete decarbonisation of the electricity network, i.e. the closure of all coal- and gas-fired power stations, by 2035.

None of these proposals were taken up by governments.

Instead, oil and gas producers made a dash for LNG: between September 2021 and October 2022, 16 new onshore terminals (with a capacity of 89 billion cubic metres (bcm)), and 22 floating regasification units (90 bcm) were commissioned. This capacity is equivalent to 116% of 2021 European gas imports from Russia.

Climate Action Tracker warned:

Such significant investments in fossil gas infrastructure, most of which will go online after the EU has had enough time to develop low carbon alternatives and invest in energy efficiency, are impossible to justify. […] These investments will either result in significant stranded assets or will threaten the EU’s emission reduction goals. To make matters worse, the EU and its member states are encouraging other countries such as Algeria, Angola, Azerbaijan, Egypt, Senegal and Congo to invest in fossil gas extraction.

A Greenpeace report accused gas companies of “capitalising on the shock of the Russian invasion of Ukraine to weaken [decarbonisation] regulations”, and to lock in 15-20 year LNG supply contracts. The proposed projects will not be operational in time to address the short term emergency: “most projects will only come on line by 2026, far too late to respond to the current supply crunch”. The US has approved projects that, if built, would double its gas export capacity to 439 bcm per year.

Just as extreme as the rush to LNG is the approval of new oil and gas production projects such as Rosebank (west of Shetland, the UK) and Willow (Alaska, the USA).

These projects are unlikely to start producing oil until after 2030, signalling these governments’ contempt for the UN bodies, and indeed the UN secretary general, who are saying that no new oil and gas developments should be contemplated if climate targets are to be met.

The UN Environment Programme Emissions Gap report 2022 is unequivocal:

Policies currently in place with no additional action are projected to result in global warming of 2.8 degrees C over the 21st century. […] Despite the call for countries to “revisit and strengthen” their 2030 targets, progress since COP 26 is highly inadequate.

That spells disaster.

Another aspect of European energy policy that deserves comment is the focus on hydrogen. While hydrogen might play a small role in future post-fossil-fuel energy systems, the political focus on it now is damaging – and amounts to a survival strategy for fossil fuel companies.

Governments are going along – and there is no clearer example of their twisted priorities than the bizarre, neocolonialist scheme to produce hydrogen from renewable electricity in Ukraine and export it. Hopefully Ukraine will expand its renewable electricity generation many times over in the coming years, but that electricity should in the first place be made available to the grid, to hasten the shutdown of coal-fired power stations and coal mining.

What to do?

Recognising the damaging role being played by the political process is on one hand very frightening, because it indicates that governments are indeed collectively creating a situation where global heating could reach dangerous levels during the 21st century.

That recognition must be a spur to action by society, outside of the political process in general, and outside the discourse around the international climate talks in particular, in my view.

It is significant that even in UN reports, and speeches by the UN Secretary General and prominent climate scientists, we are hearing talk of the need for deep-going change in society. In my view – although not necessarily in theirs – that change means confronting and breaking the power of capital. (I wrote more about this here.)

A starting-point for such action is for us all constantly to make the connection between this long-term global issue – climate change – and more immediate day-to-day ways in which capital inflicts hardship on the vast majority of people. Climate change is affecting the poorest people sooner and harder than others, and this is no accident. Tackling climate change really is a social justice issue.

We need to find ways to link the political fight for action on climate change to broader social justice issues.

In Europe, one of the most successful examples of such an alliance is the joint action by climate activists and public transport workers in Germany on 3 March. They brought together workers’ and passengers’ demands for better public transport with calls for more drastic decarbonisation efforts and curbing motor traffic.

Another issue in Europe is the obvious link between the inflated energy bills facing millions of households, and the potential for insulation and decarbonised heating. A crash programme to insulate homes and install electric heat pumps would permanently both cut the cost of domestic heating and slash the level of greenhouse gas emissions from heating systems.

Putting these issues at the fore is vital, because only big social movements, not activists however brave, will be able to confront governments and the interests of capital they represent.

That is not to decry the courageous efforts of those activists, whether those who took part in the protest at Lützerath, or thousands of others across Europe who engage in acts of civil disobedience. Those acts are necessary and I applaud them. They need to be seen as stepping-stones to a much wider movement.

5. Conclusions

➤ Putin is a creature of capital, not some sort of opposite to it. The western powers saw him as a gendarme of capital in the post-Soviet space, even after 2014.

➤ Last year, that gendarme, provoked by social movements across the post-Soviet space, ran out of control by launching the invasion of Ukraine; the western powers have reacted with sanctions, which are limited by their economic interests.

➤ Putin’s “self sanctioning” with gas is an important illustration of the way that imperialist nationalist ideology determines Russian policy, at the expense of economic management.

➤ If the US Democrats, and the EU leaders, were determined to tackle climate change, they would have taken the invasion as an opportunity to move economic policy more rapidly away from fossil fuels. They have done the opposite, and reinforced dependence on oil and gas.

➤ The long-term consequences of this approach to climate policy, implemented by governments that are bent on defending capital and social injustice, are extremely dangerous to us all. Society needs to oppose this with all the methods at its disposal.

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12 comments:

  1. Pure nato sponsored propaganda. If the Russians main target was civilians you can be sure they'd target them pretty easily. As it is, Russia continues to eat up whatever NATO directed Ukrainian army throws at them......as was their plan. So much so that the cokehead zelensky is continually asking for more weaponry despite the 'success' his forces are having according to NATO media. Meanwhile to demonstrate NATO desperation and weakness they have resorted to sabotage and terrorism in order to divert Russian military from its objectives I.e blowing up a dam. Just like the nordstream pipeline and nuclear reactor previously, the NATO media would have you believe Russia is blowing up dams and other facilities it controls due to no logic other than Putin is mad..........next he will be shooting himself in the foot to prove he's mad! Slava Rossiya!

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  2. Do you seriously deny the atrocities committed at Bucha, Mariupol and so many other places? Every day the Russians target civilian occupied apartment blocks. Do you seriously deny the wholesale abduction of thousands of Ukrainian children?

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    1. Coincidentally, Barry, last night I was watching a couple of YouTube items featuring the Nazi apologist David Irving. Have you ever watched him? There is a good film out called Denial about him trying to sue Deborah Lipstadt for calling him a Holocaust denier. Worth a watch if you haven't already seen it.

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    2. Lol the unrivaled bullshit from NATO sponsored western media has met a rival or two on here.

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    3. Barry,

      The first paragraph should tell you that NATO-Ukraine & Russia are all pissing into the same bowl and drinking from the same cup...

      The combination of shipments to China and India, which are taking about 80% of Russian oil, and of sanctions-avoiding tricks by European and other shipping companies, means that the western powers’ price cap on Russian oil is causing few problems.

      Every day the Russians target civilian occupied apartment blocks.

      And as Simon Pirani pointed out in his piece, Rambo's men aren't exactly playing by Geneva Convention rules either...

      The report also says that “the Ukrainian armed forces have, on a much smaller scale, failed to comply with International Humanitarian Law rules on the conduct of hostilities”, especially by using explosive weapons in densely populated areas, and have committed human rights law abuses “although much more limited in scope”, including unlawful killings and arbitrary arrest and detention, particularly of people alleged to have collaborated with the Russian authorities.

      Although Simon (like you) sugar coats things by saying "although much more limited in scope”, .....Human rights abuses are just that human right abuses...It doesn't matter who carries them out....Russian, Ukrainian or other..........What you Barry and others like to do is play the numbers game.....

      Do you seriously deny the wholesale abduction of thousands of Ukrainian children?

      I don't....and if you do just a little bit of research you'll discover human trafficking on every border in Ukraine...There is a lot ((100s of thousands) of Ukrainians being exploited into Poland,Hungary....Moldova.. (do someresearch)....

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    4. Mick, I have been all over this blog having to sift through articles from every quarter. The quality of those which are more sympathetic to Russia has been generally poor. Whereas many of those supporting Ukraine have been of a high quality. The best critique of the Ukrainian perspective has come from Mark Hayes, but he doesn't side with the Russians.

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    5. That's right Frankie - abuses are abuses. The IRA too carried out war crimes even if there is a reluctance to call it by its name. But the numbers game is important. Otherwise, we just establish a false equivalence. Kissinger becomes just another war criminal on a par with say that Australian SAS guy. Both are war criminals but the sheer volume of Kissinger's puts him in a different league.
      Simon, incidentally, is not a supporter of the Ukrainian regime, but is a supporter of the Ukrainian people's right to resist much as he backs the rights of the Palestinians to do likewise. His research is invariably good, but then he has the advantage of having lived, worked and studied in the region. A fluent Russian speaker. I guess you must be fluent in French Frankie, given the length of time you lived there.

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    6. Yes Anthony I have seen Denial. Important never to suppress opinions like Holocaust denial but their evidence base needs to stand up to scrutiny.

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    7. Barry - for sure. Their evidence base invariably fails the scrutiny test - much like Putin's claim not to be at war with Ukraine. It is like listening to the Shinners claiming that the securocrats were responsible for all their woes and Scap was innocent.

      Long before the film I had followed Lipstadt's destruction of his credibility. In one of the slots he was waffling on about the achievements of Himmler. I just switched off. I loved the part in the film where the barrister refused to shake his hand.

      He spoke in Cork once and there was a protest outside. My view was that protesting was fine providing it did not intervene with people's right to hear what he had to say if that was their choice.

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  3. Anthony....

    The IRA too carried out war crimes even if there is a reluctance to call it by its name.

    They did...the Enniskillen bombing....a war crime. The INLA and Darkley also springs to mind. I've lost count of the war crime's carried out by Loyalists on behalf of their British paymasters... Kingsmill was a war crime and the Glenanne gang carried out upto 120 war crimes...Its all numbers at the end of the day....


    But the numbers game is important. Otherwise, we just establish a false equivalence. Kissinger becomes just another war criminal on a par with say that Australian SAS guy. Both are war criminals but the sheer volume of Kissinger's puts him in a different league.

    The difference between Kissinger getting away with war crimes and the Aussie SAS head isn't numbers but simply Kissinger is part of the 'big club' that Carlin told us we will never be part off...Thats why Henry gets away with murder and the Aussie SAS head didn't...

    Simon, incidentally, is not a supporter of the Ukrainian regime, but is a supporter of the Ukrainian people's right to resist much as he backs the rights of the Palestinians

    I don't think Simon supports either side in the Russian/Ukrainian war but sometimes he sugar coats things....Simon prove me wrong and give TPQ your views in the Biden crime family and Hunters laptop...............

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    1. Frankie - yet the sheer scale of the Kissinger war crimes dwarfs the Australian. The numbers remain crucially important. War crimes are war crimes as you point out and should never be countenanced but if we look at the war crimes committed by the Monteneros in Argentina, the difference in scale is massive which always makes it worse and does not allow for the argument that the action trumps the scale.

      Simon very much supports the Ukrainian side in the war. He has little time for the government. He has written expensively about it, seeing Russian aggression pretty much as Chomsky outlined it in the opening days of the war. He writes from a Marxist/anti-imperialist perspective and has extensively researched the region in a way that I have not.
      Some on the Left have found common cause with the far right in favouring Russia but I imagine that is because of the authoritarian impulse at the heart of either. Some just want to be in charge of the rest of us!! Not something you are going to take lying down!!!

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