“The import tariff hits Russia’s economy because Putin gets less income from exports, while we will not have to give up Russian energy sources completely,” the IfW expert said.
The Kiel Institute for the World Economy (IfW) believes that the imposition of import duties on Russian oil and gas is preferable to the U.S. proposal to cap prices on energy from Russia. “The duties reduce Russian revenues and increase G7 revenues, thereby alleviating the burden on citizens caused by high energy prices,” trade researcher Alexander Sandkamp explained Monday, June 27, amid the G7 summit taking place in Germany.
According to the IfW expert, the introduction of an import tariff by the G7 would make sense, because Western sanctions are hurting the Russian economy in the long term. In the short term, on the contrary, previous sanctions led to a sharp increase in energy prices, which in turn allowed Russia to get more money, despite lower export volumes. “The import tariff hits Russia’s economy because Putin gets less revenue from exports, while we won’t have to give up Russian energy completely,” Zandkamp believes. In addition, imposing a tariff would encourage energy savings, which is appropriate under current conditions and consistent with climate goals.
By contrast, limiting the price below the world price, as suggested by the U.S., would further fuel demand for energy because it would make it cheaper and hide the real demand. Moreover, the effect of this measure may come to naught if large buyers, such as China or India, do not support it and Russia can supply its energy carriers to other buyers at higher prices.