The energy sector is widely regarded as the Achilles’ heel of the Russian regime, a factor that could ultimately compel Vladimir Putin not only to halt the Russian-Ukrainian war but also to abandon broader aggressive ambitions against other states.
Historical precedent has shown that when the Soviet Union or modern Russia lacks the financial leverage of petrodollars, Moscow adopts a markedly different approach towards the West and its neighbours, often feigning pacifism.
Conversely, when oil prices rise, the Kremlin exhibits belligerence, as demonstrated by its recurrent rhetoric of military triumphalism.
The Impact of Sanctions on Russia’s Energy Sector
Sanctions targeting Russia’s oil and gas exports have been central to Western efforts to limit Moscow’s ability to finance its war. One key aspect of this strategy has been restricting the operations of Russia’s so-called “shadow fleet” of tankers, which enable the circumvention of price caps and other trade restrictions.
The latest sanctions imposed by the Biden administration include measures against a portion of this fleet, as well as certain Russian energy firms. However, major state-controlled companies—Gazprom, Lukoil, and Rosneft—have largely been spared from direct asset freezes or comprehensive trade bans.
This selective approach highlights key weaknesses in the sanctions regime. While targeting illicit shipping operations aims to disrupt Russia’s ability to evade price caps, it does not address the broader issue of continued oil and gas exports to non-Western markets.
Moscow has adapted by redirecting energy sales to China, India, and other countries, reducing the overall impact of Western restrictions. Additionally, gaps in enforcement, particularly regarding financial transactions and intermediary states, further limit the effectiveness of these measures. As a result, while the sanctions have complicated Russia’s energy trade, they have not decisively weakened its capacity to fund its military operations.
Are Current Sanctions Sufficient?
Sanctions have exerted a tangible impact, though their overall efficacy remains debated. The fact that Russia continues its aggression suggests that the measures are insufficiently crippling. A more rigorous approach, akin to the so-called “sanctions from hell” once mooted by the Biden administration, has yet to materialise.
Previous reluctance to enact harsher measures stemmed from concerns that cutting Russia off from global energy markets would trigger a price surge detrimental to Western economies. However, political considerations, including the U.S. presidential election cycle, have influenced sanction policies. The Trump administration may take a different stance by pressuring OPEC to lower oil prices, thereby indirectly undermining Russia’s revenue streams.
The Role of Saudi Arabia and OPEC
Saudi Arabia’s role in global energy dynamics is particularly relevant. Riyadh’s strategic interests dictate a balancing act between maintaining stable oil revenues and responding to Western geopolitical manoeuvres.
The Trump administration has previously engaged in transactional diplomacy with Saudi Arabia, seeking economic concessions in exchange for security guarantees.
The prospect of a U.S.-Saudi defence pact, resembling the U.S.-Japan security alliance, could factor into negotiations aimed at lowering oil prices.
The extent to which Saudi Arabia is willing to align with U.S. interests remains an open question, especially given its evolving relationship with China and its own economic reform agenda.
Russia’s Alternative Markets: China and Central Asia
Russia’s oil and gas exports continue to sustain its war economy. While European markets have largely severed ties with Russian gas, alternative export routes have emerged.
China has become a primary buyer of Russian energy, albeit on highly unfavourable terms for Moscow. The proposed Power of Siberia 2 pipeline, intended to supply Russian gas to China, faces significant economic and technical hurdles.
Mongolia Excludes Power of Siberia 2 Pipeline from 2028 National Development Plan
Beijing’s insistence on paying domestic market rates for gas, rather than the higher prices once charged to European customers, diminishes the project’s financial viability.
Central Asia’s energy resources further complicate Russia’s export ambitions. Turkmenistan’s gas supplies are increasingly absorbed by China, while Kazakhstan and Uzbekistan are diversifying their energy trade to reduce dependency on Russian infrastructure.
Moscow’s previous dominance in Central Asian energy transit is eroding as regional players seek alternative routes and partnerships.
The Role of LNG in Weakening Russia’s Energy Leverage
The global liquefied natural gas (LNG) market has further undercut Russia’s leverage. The rise of U.S. and Qatari LNG exports has diminished Europe’s reliance on pipeline gas from Russia.
Russian attempts to expand its LNG industry have been stymied by Western sanctions restricting access to key technologies. Consequently, Russia’s ability to reorient its gas exports towards Asia remains constrained.
Energy Coercion in Russian-Occupied Territories
Beyond Russia’s broader energy strategy, the situation in Moldova and its breakaway region of Transnistria highlights the geopolitical ramifications of energy dependencies.
Moscow’s decision to halt gas supplies to Transnistria, ostensibly due to Moldova’s refusal to settle payments, has exposed the fragility of Russia’s influence in the region.
The subsequent emergency assistance from European energy providers highlights the declining efficacy of Russia’s energy coercion.
This episode echoes similar energy crises in Russian-occupied territories, such as Abkhazia, where Moscow’s inability to provide reliable energy support has weakened local allegiances.
Can Energy Sanctions Stop Russia’s War?
As Western nations continue to recalibrate their energy policies, the long-term trajectory of Russia’s energy sector appears increasingly precarious.
The erosion of its European customer base, the challenges of penetrating Asian markets under unfavourable conditions, and the expansion of global LNG infrastructure collectively diminish Moscow’s economic resilience.
If energy is indeed the Kremlin’s Achilles’ heel, sustained pressure on this front may prove pivotal in curbing its aggressive ambitions.
However, the full effectiveness of such measures depends on their enforcement, the cooperation of key global players, and the political will of Western governments to endure economic consequences in pursuit of strategic objectives.
