In today’s episode, we are joined by two exciting guests! Our first guest, Owais Arshad, is a geostrategist who advises on geopolitical developments, sanctions regimes, export controls, and international finance.
Later in the episode, Dominic is joined by Oleh Savitskyi, a world-class climate and energy policy expert with 10 years of experience in the field. Since 2022 Oleh has mobilized to fight the Russian fossil fuel industry as Campaigns Manager at NGO Razom We Stand.
For more information on issues raised in this podcast please follow the links below:
- Global Witness identified that 1 in 20 flights in UK is using Russian jet fuel
- Russian oil profits rise in July as G7 fails to tighten sanctions and revise the price cap.
Produced by Lottie James
Transcript of interview with Owais Arshad
Dominic:
Hi, I’m Dominic Bowen and I’m the host of the International Risk Podcast. Today we’re going to turn our attention to the issue of Russian oil focusing on the risks created by Western countries who are bypassing sanctions via so-called Laundromat countries. We’re going to seek to understand the risks that this has for global security in the context of the ongoing war in Ukraine and more broadly for the environment and the complicated relationship between ethics and the economy. Today, we’re joined by Owais Arshad. He’s currently the Director of Global Economic Sanctions Advisory at the Royal Bank Of Canada. Owais is an experienced advisor on global sanction regimes with a wealth of knowledge in how to apply these complex transactions the novel products and broad risk assessments associated with all of this. Owais joins us to share his own personal opinions on the situation in Russia which he has followed very closely. Thanks very much for your time today, Owais.
Owais:
My pleasure Dominic happy to be on board.
Dominic:
Before we delve deep into the specifics I wonder if we could start at the macro level with a 101 of sanctions and explain to our listeners what are sanctions, why they are used, and really tangibly what role have sanctions played in the war in Ukraine so far specifically in the context of regulating Russia and Russian activities globally?
Owais:
Yeah, sure so you know economic sanctions. The way I like to sort of think about them is as these measures or policies enacted by countries to you know achieve foreign policy national security objectives and so that can take a variety of forms. And traditionally it has been a tool that was quite sort of you know, limited in its application. The most famous case was, you know the US embargo against Cuba that’s been in place for decades and decades. But I think what happened with the sanctions landscape was particularly after 9/11 it’s become an increasingly sort of used policy. Not just by governments but other sorts of entities and regional blocs such as the EU as well. So it’s become a very sort of popular tool to address geopolitical crises. And I guess the beauty of sanctions is that you know you don’t necessarily need to deploy forces or use the kinetic force you’re trying to implement these restrictions to achieve a change in behavior or some sort of modification in a policy with respect to the target in order for you to be able to then I guess achieve what your own particular aims and objectives right? And so really, it has become an increasingly popular tool. It’s used for example by the UN force for certain regimes such as North Korea etc. but I think the most powerful user of this tool or weapon is the United States and really that’s by virtue of the fact that global trade is in US dollars. Oil trade, for example, one of the most important markets in the world is largely denominated in USD and hence the term petrodollar. So you know it’s something that because of the nature of the US dollar it’s quite impactful when sanctions are sort of levied by the United States and the reality is that the manner in which this is operationalized is the fact that any transaction in the US dollars ultimately has to transit the US financial system. And therefore the Department of Treasury says that hey if a US dollar denominator transaction is flowing through our banks through our systems through our sort of geography we assert control over it and therefore that’s how they’re able to essentially prohibit trades in many targeted either sectors entities or transactions. So Iran for example, is a classic case where the US said yeah, you can continue trading with Iran or you can lose access to US dollars. So a lot of folks thought it was not worth taking the risk and so through the use of secondary sanctions and primary prohibitions on US dollars they were able to isolate it now. Russia is different I guess almost a different type of beast altogether just given the size and heft of its economy and you know while obviously sanctions have been really ramped up over the last year they’ve been around since you know 2014/2015 when Russia initially invaded Crimea. For example, the initial round of sanctions even prompted a novel set of prohibitions called sectoral sanctions where again, it’s this ability to calibrate. The Obama administration administration decided that yeah instead of banning or completely prohibiting dealings with large state-owned enterprises which you know are where were particularly important to European counterparties. Instead, they imposed sectoral sanctions which were trying to limit the axis of capital by large Russian companies from the West and so that was sort of the initial set of novel prohibitions that were that were imposed along with things like designations against certain oligarchs or even prohibitions outright in terms of all dealings with you know, certain entities in Russia’s defense sector. So what we find though is that since last year when the invasion sort of Ukraine started even more sanctions have been levied against Russia, for context, Russia went from being a relatively sanctioned jurisdiction to the most sanctioned jurisdiction in the world and over like maybe a couple of weeks and that was you know they achieved Iran status in what took them a couple of years to achieve, Russia achieved it and within two weeks so it’s been an extraordinary change. And I think every aspect of the Russian economy is now subject to scrutiny or some form of prohibition. Even when it isn’t there are a lot of risks. So for example on the grain trading which you know the Russians have been pushing back against quite a bit and then I think the thing to note here is that one of the most novel and unique aspects of the Russian sanctions program is just this entire set of restrictions that have been introduced with respect to their oil trades right? Russia is a major oil producer I think it was once likened to a petrostate or an oil pump which happens to be a state. You even talked about you know Russia using the energy weapon to coerce Europe and I think that has always been the case or has been something that has been of concern with respect to policymakers and now you see a definitive sort of break from Russian energy and you see a lot of Western countries trying to completely step away and disentangle themselves from dependence on Moscow although that’s been practically speaking quite challenging to achieve in totality.
Dominic
Russia being the most sanctioned country in the world and knocking Iran out of the place that had been in that spot for quite some time is no small achievement. As you said the the sanctions that are in place and how they’ve been used have been an attempt to harm Russia’s ability to export oil and curtail its financial power and I understand that Russia has traditionally made 4 times as much money from oil than it has from gas. Now for most of our listeners in Europe. There’s been a huge focus on Russian gas and its impact on European energy markets and we understand that. But why has oil in particular been targeted by sanctions is it just because of the financial power of oil dollars in Russia or are there other reasons why oil has been targeted?
Owais
Yeah, so I think overall the concern of policymakers has been that the petroleum revenue and the energy revenues that Russia has been generating have been contributing in a material way to the war effort in terms of allowing them to you know, have this capital to fund their troops, acquire equipment et cetera and so obviously shutting that down has been a critical priority for the United States and other western capitals. The reality is that prior to the invasion Russia’s oil exports were tightly you know wound with Europe now that doesn’t necessarily mean only the consumption piece. It also means things like the transportation of maritime crude and the insurance aspect of it and the vast majority of that was all done through ah Europe and in particular London through Lloyd’s Markets and so I think it was natural for them to put some constraints on this just because of the fact that Russia was heavily reliant on western firms to ship this stuff to ensure this stuff and and that and and and and ah also to to process things in Rotterdam etc. Obviously, that has completely shifted. It’s no longer being imported in those volumes in Europe directly at least and then obviously there is this now new novel prohibition that hey if whatever you produce? Whatever you’re transporting from Russia recall that the vast majority of oil that is traded in the world is loaded onto ships and that’s how it sort of moves around. I’m not sure if you’ve seen some of these maps which kind of show you the shipping lanes of the world and how they’ve moved from where Russia used to ship them and so now it’s sort of going to these exotic locations in India and China and so forth. It’s all done through shipping and Western companies dominate shipping whether it’s the Greeks with their large tankers and fleets. Whether it’s the maritime insurance piece or even just the physical infrastructure to easily take in Russian oil. So I think that there was a recognition that all of these elements are critical to Russia’s ability to generate revenue and therefore putting constraints on them through the oil cap was considered a priority. Obviously, it’s been controversial while I think a lot of the sort of perhaps the political side is sort of claiming victory and saying that yes the Russians have been severely impacted I think perhaps a fair assessment is that the picture is mixed. Also when you descend into the specifics, oil is oil sure but when you get into the grades there are differences, and obviously, this policy has had mixed results like mixed results I guess. But then below the oil price gap the are prohibitions and parameters that have been laid out in the context of these sanctions. If oil is being traded below those set limits it’s okay to continue to insure it and transport etc. So there’s also this weird caveat or loophole if you will with respect to enforcement and the way the framework has developed that allows leakage I guess and so while it essentially has reduced Russian oil revenue to and with regards to you know, financing the war, it’s probably not reduced to the level and extent that maybe was hoped for by the architects of this policy.
Dominic
And if we can look at another country, one of the countries that have often been labeled one of the Laundromat countries the United Arab Emirates they have condemned the invasion of Ukraine at the United Nations on several occasions this year and they’ve been largely applauded for doing so but at the same time they are amongst a number of countries that are openly not enforcing US and European sanctions imposed on Moscow’s companies and the elite and whilst as you just said the sanctions have taken a toll on the Russian economy countries like the UAE countries like India, helping Russians get the money out of Russia get goods to global markets at the same time as they are well at least in the case of the UAE also criticizing Russia’s involvement in Russia’s illegal invasion of Ukraine. Can you try to explain this juxtaposition maybe with your economic lens?
Owais
So I lived for many years or grew up in fact, in Bahrain and used to visit Dubai a lot so have some familiarity with those latitudes and the Emiratis are a fascinating example. I think their core idea is that they want to be open for business for everyone and I think the current I guess and actions kind of belie the fact that over the last decade perhaps since the Trump administration, there have been increasing tensions between the United States and the GCC broadly from a geopolitical perspective. First, the Iran nuclear deal the JCPO was kind of a shock to the GCC including the Emiratis who view the Iranians as an existential threat to their own country in some cases. You know there are 2 islands that Iran occupies that the UAE claims so there was I think a general feeling amongst GCC states that the US could not be relied upon as heavily or as explicitly for security guarantees etc. And so there was this idea that perhaps it’s time to broaden the relationship or look at other patrons or diversify if you will they will diversify away from America in terms of their importing meeting their security challenges. So the Russians once all this trading shut down all of this money that used to sort of flow to London and all of that got rerouted to Dubai right? And so I think just today in the Wall Street Journal there was this piece talking about how Russian money has become an extremely important inflow for the emirates just in terms of the real estate sector there are a lot of luxury properties being bought by oligarchs etc yachts are ending up in the United Arab Emirates and it’s extremely profitable for the UAE. Imagine all of those oligarchs the services which are now banned, trust services, complex financial services. All of that is now banned in Europe and the UK where traditionally all of this was based. Emiratis have sniffed an opportunity. Emirati banks are setting up specialized wealth management arms to deal with the Russian influx. Food everything you can think of is sort of popping up to cater to this new wealthy class of people who are now you know increasingly finding it difficult to go to Europe or anywhere else but Dubai remains open for business, right? And then strategically I think it also nicely aligns with the UAE’s priorities right? So for example, the UAE has tried to launch its own oil benchmark. They’re interested in changing the dynamics of how oil is traded, regionally and globally They’ve advocated for example in a couple of deals with the Indians to do the deal outside of the US dollar either do it in yuan or Indian rupees or other currencies. Yeah, including the Emirati dirham. So there are a couple of I think really compelling reasons for the emiratis to sort of switch that’s and they’re kind of I think playing that geopolitical fence. Sort of a role where they’re kind of on the one hand they don’t want to completely rupture the relationship with the United States but on the other hand they don’t want to completely align themselves with the US either and so they’re kind of profiting from both ends. And it’ll be interesting to see whether they can actually sustain this, on the one hand, they have shown some deference to US sensitivities. For instance, I think that there was a bank, MTS, I believe it was called that was granted a license to start operating in the UAE which really was a Russian bank. Essentially even before they started operations it got sanctioned by the US and then the emiratis ended up having to pull the license. And so it never actually got off the ground so you know I think that’s really why the Emiratis have elected to not necessarily enforce this action because it’s extremely profitable. And it’s also worth sort of noting that some of it has been just natural increases in business right? So some of the Russian oil trading arms have just relocated. So if they have subsidiaries based in Dubai and they’re legally completely distinct from the Swiss parent and they have you know linkages to the Swiss entity technically that Emirati entity can continue dealing with Russian oil and not fall afoul of Swiss sanctions, for instance, so there are these regulatory arbitrage plays essentially that are out there that some companies are in fact embracing because there is a lot of money to be made trading Russian oil, etc.
Dominic
The Center for Research on Energy and Clean Air, the CREA, released a report. They’re a Finish group that released a report back in April this year and I think many people found the results quite surprising and others found their results quite shocking and it was quite damning for Western countries. You mentioned the example then of some Swiss companies but the claim in the report by CREA is that albeit legally countries and companies within Western countries are not sticking to their own rules when it comes to importing oil originally sourced in Russia. Can you walk us through what is being claimed, what countries are involved, and the sort of figures we talking about here?
Owais
I mean I think the CREA report is actually a brilliant document in the sense that it really quantifies the huge jumps that we see from all of these countries. I think that in the case of the Emirates what’s clear is that historically the Emirates have not you know, exported much in terms of petroleum derivatives to Europe and western countries and by petroleum derivatives. Taking that crude oil putting it in a refinery refining and then you get a bunch of products including diesel you know Jet Fuel etc. and so what’s what I think the accusation or the the analysis that CREA has provided shows. A lot of Russian oil ends up in Dubai ports. It gets refined and then the products, because they’re quite substantially transformed, are not considered to be Russian in origin and nature anymore and then that same refined Russian product can be sold by an Emirati firm to the UAE to the EU or other Western countries and technically that’s completely fine and it’s very hard from a supply chain and compliance perspective to trace molecules of energy to its ultimate source in provenance because the way a lot of the refineries work the way a lot of the logistics work is that you know you can have things like blending for instance, and so if you really wanted to ban Russian oil. Okay, fine. But what if it’s a blend right? What percentage is the taint of Russian oil would make say diesel considered prohibited? And of course, this is the refrain that you hear from the Indian Foreign Minister the same sort of line of argument that your rules right now do not prohibit this activity, and if it’s not a prohibited activity why are you sort of pushing back against it? So that’s where there’s also I guess tension where on the one hand the policies are there. They’re restrictions. There are prohibitions. But I guess people don’t necessarily realize that they’re not perhaps as encompassing as they might have appeared to be at first blush and there are good reasons for this right? Because when you ban something for trading from a pricing or whatever a sanction’s perspective, it can have second-order and third-order impacts on markets. So I’m not sure if you’re aware of this or if you recall this story a couple of years ago a large very wealthy Russian oligarch Oleg Deripaska was sanctioned by the United States. Deripaska controls Rusal which is one of the largest aluminum companies in the world and suddenly he was sanctioned therefore his companies were sanctioned. There was an impact on aluminum prices globally it caused spikes in prices. There were fears of shortages and then if you think about what is aluminum used for everything from aviation to cars to you know whatever it caused a lot of issues for US allies and I think there’s been a hesitancy to then therefore just issue blanket prohibitions and blanket restrictions because it can cause unintended consequences. So it’s really difficult on the 1 hand to strike that balance right? That hey you want to constrain an activity but on the other hand, minimize these sorts of unforeseen secondary order and tertiary order impacts.
Dominic
And I think with risk management that’s always the issue, isn’t it? It’s those second and third-order effects that come out of that and I think that’s where you know we often earn our money. You know that’s fine. We can predict and in February 2022 coming out of Ukraine myself out of eastern Ukraine it was very easy to predict that Russia was about to to invade. But that didn’t earn me any kudos where we start to add value is where we can start going, okay, and these are the second and third-order effects. This is what the impact is on currency exchanges. This is what the impact on population flows is this is going to be the impact on geopolitics and you obviously have a huge amount of experience in assessing compliance and I guess non-compliance with sanctions. So what are the results why are these findings so impactful I guess what are the second and third-order risks that emerge from countries that continue to buy these derivatives that are ultimately coming from Russian crude oil?
Owais
Yeah, so I mean currently in terms of consequences aside from the reputational consequences there really hasn’t been much. There are some good proposals I think on the table to potentially strengthen the oil cap. I think CREA for example had some good practical recommendations. 1 was, for example, prohibiting the import of petroleum derivatives from known refineries that have been importing Russian oil right? So there’s a port in India called Syka. There’s the Cosmino port on the Pacific coast. There are a number of these well-known sorts of refineries and ports that are known to be receiving Russian oil and a logical step would be to you know to prohibit importation from those refineries for instance, another potential area for strengthening would be to impose secondary sanctions and that’s the case where you know in Iran where say a Quarati firm enters into a contract with a Chinese entity. None of it has anything to do with the US but because it’s either denominated in US dollars or it violates the oil cap price range the US could potentially go ahead and sanction both those parties. It hasn’t really done so to date but secondary and tertiary sanctions could be a way to to to give these prohibitions more teeth and then therefore essentially signal to market participants hey you can either continue dealing with US dollars and have access to those markets or alternatively lose access and get sanctioned and continue dealing with Russia. I think a key recommendation of that report was just focusing on the shipping aspect of it if you know if a ship has indulged in some of these deceptive practices. Whether it’s ship-to-ship transfers and international waters spoofing ban those ships. Maybe those management companies etc. because shipping again is one of those complicated industries where you know a ship can be chartered and owned by someone else. The crew comes from somewhere else, Etc. Etc. So if you really parse that and start targeting entities beyond just the vessels and even activities like ship-to-ship transfers et cetera that might also give the oil caps some more impact and constrain this type of activity further.
Dominic:
If we do consider the sanctions broadly, do you think that the ethical and legal considerations, for example, the illegal invasion of Ukraine, should be intertwined? You talked about the the sanctions against a Russian oligarch that had a huge impact on aluminum prices should these legal and ethical considerations be kept separate or do you know the risk of them being intertwined with economic decisions?
Owais
Yeah, it’s an interesting one. I mean ultimately sanctions policies are obviously enacted by governments and government officials. Having said that businesses are free to take a risk-based approach or define their risk appetite to be more conservative than what’s permissible. So for instance, Russian securities is a good question or a good example where you know, not all Russian securities I’m talking about equity debt and other types of instruments. Not all of them are especially prohibited. But you know given just the reputational risks associated with dealing with large amounts of you know securities that are tied to companies that may be assisting the war effort a lot of companies order investment managers for example, have just elected not to deal with those types of transactions or securities purely from a risk appetite consideration even where it’s for example permissible. The governments I would argue it may not necessarily be up to the government to quote enact or legislate if you will these ethical practices. But I think it behooves businesses to do that type of analysis. I can tell you from my experience some institutions took the view in 2014 that hey Russia has invaded Crimea its actions are beyond the pale. We don’t want to be doing business with Russian individuals oligarchs etc. and they consciously particularly I know here in Canada made an effort to purge their business books to sort of terminate those kinds of relationships. Obviously, that consideration did not sort of play out in the same way amongst other sorts of geographies and players, right? So as I mentioned the the thing is in Europe in particular historically Russian Oligarchs russian money russian entities have generated a lot of revenue you know. Ah, Gazprom for example I think they used to issue a lot of their bonds out of Luxembourg et cetera they were very tightly intertwined with various aspects of Europe. Cyprus at one point had a huge exposure to Russian individuals. So all of that’s to say is that businesses could have elected in 14 to start reducing their exposure. It was just extremely profitable to do so and so I think that’s where ultimately it comes down to those individual businesses that knew from previous experiences with regards to Russia whether it’s Georgia Chechnya or other places where they’ve had conflicts that these conflicts tend to persist for a long time. They became frozen perhaps like what’s happened in Moldova and you know Russians have had a presence there. It flares up it dies down but never quite goes away. So I think the reality was on the wall for anyone to read whether or not they acted on it. And I think last year because of the nature of the invasion. It really kind of forced people to say like look okay, it’s no longer tenable to continue doing business in Russia so I put it on the business I think rather than the government.
Dominic:
So that’s not a bad place to put it and perhaps not a bad place to pause the discussion but look thank you very much for a really insightful discussion. I enjoyed today’s conversation.
Owais:
My pleasure. Thank you for having me.
Dominic:
That was a great conversation with Owais Arshad. He’s the director of Global Economic Sanctions Advisory at the Royal Bank Of Canada giving us his views on sanctions against Russia.
Transcript of interview with Oleh Savytskyi
Dominic:
We’re now joined by Oleh Savytskyi who currently serves as the campaign’s director at Rasam We Stand based in Kyiv. Oleh is a climate energy policy expert who has worked with policymakers, public institutions, scientists, civil society groups, and experts in order to advance reforms in areas of energy and the environment in Ukraine. Thanks so much for joining us on The International Risk Podcast today Oleh.
Oleh:
Hi, Thanks for having me.
Dominic:
Addressing the UK parliament back in February 2023 President Vladimir Zelensky said that the Ukrainian victory would change the world and then he continued to say it’s a change that the world has long needed. Now I think this is a statement that your organization Razom We Stand largely agrees with. Can you start by explaining to our listeners what Razom We Stand is working towards?
Oleh:
Yeah, so our organization has 2 main goals and 2 main directions of work. The first is keeping Russian Fossil fuels in the ground and introducing a full embargo on Russian fossil fuels to stop the war in Ukraine because it’s the major financial flow that feeds and fuels the Kremlin’s war chest and the second one is the green reconstruction of Ukraine. Rebuilding Ukraine’s economy with renewable energy, energy efficiency, and clean technologies. So these are the 2 directions that we set from the very beginning and we probably will be busy with those 2 directions for quite a long time. Ending the hostilities will not end Russia’s aggressive policies and I think that stopping the war is not enough we need to be sure that Russia will not be able to attack anyone ever again.
Dominic:
Earlier I was speaking with Owais Arshad and he’s the Director of Global Economic Sanctions Advisory at the Royal Bank of Canada and we were speaking about the recent Center for Research on Energy and Clean Air (CREA) report and its findings regarding the bypassing of sanctions by countries including the so-called price Cap coalition. We will discuss in more detail in a few moments your open letter to the US Congress but I wonder if you could speak about the ethical and environmental risks you’re concerned about. I mean why is keeping Russian fossil fuels in the ground more than just essential for peace?
Oleh:
Yeah, so Russia is using its vast fossil fuel resources to corrupt governments all over the world and yeah, you can just look at Hungary. It’s like this failed state in the center of Europe which is still nominally a member state of the European union just in dictatorship another autocracy inside the EU. Russia is using its power and economic power which is connected to fossil fuels to establish those political and economic connections based on control of centralized flows of fossil fuels with multiple governments all around the world. So Russia is an expert in not only fossil fuels Russia is exporting corruption state capture abuse of human rights and abuse of democracy.
Dominic:
And in the research that you’ve done and research by other actors. Are you able to estimate the risk caused by the financial contributions from countries that are bypassing the existing sanctions regimes?
Oleh:
So yeah, so what we have tried to communicate from the start of this year is that any trade with Russian major fossil fuel suppliers with Rosinov Gazprom Novatech with all these other companies is contributing to Russia’s war chest hugely and Russia is taxing the income of its oil and gas companies on a progressive basis and Russia actually changed the taxation regime to even squeeze out more money from oil and gas for the war chest explicitly.
Dominic:
And so what does this mean for the illegal invasion of Ukraine like this extra funding that the the Kremlin’s able to squeeze out of oil revenue? What does that actually mean what are the impacts on the ground in Europe and what are the risks for other European countries?
Oleh:
Yeah, so with the billions of euros of dollars that Russia gets from exports of fossil fuels, just if we refer to the latest data then in July Russia increased the exports of oil, and this year we see a rebound again in Russian revenues, especially from oil sales. With this extra money, Russia can build drone factories which Russia already does with Iranian drones Russia is localizing the manufacturing of Iranian drones they spend billions of dollars on other military technologies and they try to build out new weapons to use against Ukraine. And well if Russia succeeds in destroying the sovereignty of Ukraine Russia will not stop in Kyiv or in Leviv, Russia will go further and Russia will invade other countries and Russia will use the military technology that it builds using oil money potentially against Nato member states and that could result in a very very tragic situation.
Dominic:
I think it was Bloomberg that reported that Russia earned fifteen point three billion dollars from exports of its crude oil and fuel in July alone fifteen point three billion just from oil exports and in 2023. So certainly it’s a big income earner for the Kremlin now your organization Razom We Stand was part of a coalition of international and local non-government organizations that produced an open letter to the US Congress last month regarding the issue. Can you tell us about the measures that this letter called upon Congress to take and what are your hopes regarding the possible implementation of your recommendations?
Oleh:
So yeah, our request is very simple and it just calls on the US Congress and the US government to be consistent with their policies with the sanctions regime that was established initially last year. The aim of the embargo on Russian fossil fuels and the price gap was to limit the income of Russia from the exports of fossil fuels mostly oil because oil is the biggest stream of revenue for Russia and what Russia is now doing is Russia is selling its oil to refineries which are partly owned by the Russian companies and then from those refineries they sell oil products like diesel petrol jet fuel all around the world without any restrictions without limitations and without having to comply with any sanctions regime and this is totally inconsistent and it goes as far as the US importing growing amounts of these oil products which are manufactured from Russian oil and often by companies with Russian interest or partly Russian and this is totally inconsistent and this contributes to Russia’s ability to bypass sanctions.
Dominic:
I mean the open letter to Congress is definitely commendable and I’m sure that many of our listeners if not all of our listeners will definitely agree with the sentiment behind it. I wonder what your response would be to commentators such as Tom Kloza who’s the Global Head of Energy Analysis at the Oil Price Information Service. He said that if implementation or if measures were implemented like those mentioned in your letter to Congress it would have an impact on the average US or European consumer and therefore it’s unlikely that any European or American government would implement it. So in your opinion is it right to be concerned about the risks of closing this loophole? Every risk mitigation brings new risks and I guess the risk of closing this loophole is that it does have an impact on consumers?
Oleh:
So we need to look into numbers and when we talk about the US then the share of Russian-origin oil products manufactured from Russian oil that is coming to the US is negligible and it’s around 33% ah at maximum levels cutting his stream of oil products will not affect us consumers and it can be mitigated by accelerating the electrification of the transportation fleet and by just increasing the fuel efficiency standards and diversifying the economy away from oil which should have happened decades ago and this situation that is happening now is a like a final wake up call. If the US and Europe fail to turn away from oil then we will shoot through any climate mitigation scenarios. Not only will the climate be destroyed but also international security will be destroyed because if the corrupt autocracies continue to profit from oil then we can see more wars and if you multiply this with the risks that the climate disruption brings we can end up with a pretty horrible situation and the war in Ukraine could be just a glimpse of what can happen if countries don’t act decisively to limit the power of fossil-fueled outer crises and finally get clean from their addiction to oil.
Dominic:
I know you’ve gained a lot of insight into the risks posed by fossil fuels and I know that the majority of our listeners will be very aware of the extremely serious impacts that fossil fuels have on the environment. But I’d like to finish by exploring some of the geopolitical risks that we can expect to see should the reliance on fossil fuels continue. So firstly, what does the current research tell us about the relationship between the dependence on fossil fuels and the emergence of conflict around the world? Are there any links that we’ve been able to firmly establish between these 2?
Oleh
So if we just look at the list of the main producers of oil and just the forms of government they are autocracies or dictatorships. Every single country is largely dependent on the production of fossil fuels which can be easily concentrated and practically always concentrated in the hands of very few people. This becomes a source of practically unlimited power in those countries and this source of power is always a source of conflict as well. Both internal and international conflict. We’ve seen that in the Iraq war which started with the invasion of Kuwait about thirty years ago, and we’ve seen that in many other conflicts and the conflict that Russia has unfolded is basically its attempt to expand its influence on the global energy markets. And when we look at what Russia was actually doing with the gas supplies and the oil supplies at the start of the invasion we see that it was not just a war against Ukraine. It was a war against Europe and it was a hybrid war. waged both on the military and economic front.
Dominic:
And to explore that further Oleh, what do you see as the post-war opportunity for Ukraine to lead the way in reforming the energy sector geopolitics and climate change positively?
Oleh:
Yeah, I think Ukraine’s position now is quite unique because the Russian invasion has deeply disrupted the national economy and it has wiped out quite a significant share of the Soviet infrastructure which was dependent on fossil fuels Russia destroyed a lot of coal power plants, Russia destroyed major steel factories in Mariupol which were the main consumers of cooking coal in Ukraine and Russia is continuing to damage Ukraine’s industry and power stations so we are in a situation where we need to rebuild the countries infrastructure and industrial potential and if we do it in the right way based on renewable energy on clean technologies and on the principles of circular economy we can establish a landmark what I call a global lighthouse case of rapid decarbonization and Ukraine actually can be the first decarbonized economy. So Ukraine can be a blueprint for building the twenty-first-century economy if we acquire the necessary support from the US from the European Union and if the reforms are implemented in Ukraine then we can really leapfrog to the twenty-first-century economy based on renewable energy and electrification and clean technologies.
Dominic:
Now, Oleh, you’re a campaign director. You’re clearly very passionate about climate change the fossil fuel industry and the energy sector but you’re also a citizen and somebody who lives in Ukraine. When you look around and you go about your day-to-day life what are the biggest risks that concern you?
Oleh:
Well, the obvious risk is very simple. It’s Russian rockets and Russian drones that rained down on Ukrainian cities almost every day. Just over the weekend Russians attacked a theatre in Shanihi City and killed dozens of civilians so they continue to target civilian infrastructure with heavy weapons tactical missiles with drones which they are trying to manufacture in increasing amounts. We know every Ukrainian life with an air alarm web app or a phone app that alerts people to hide when Russian drones and Russian rockets fly. So this is the day-to-day reality and yeah people working and in their daily jobs or children in like schools people in hospitals they are all potential targets of Russian military power.
Dominic:
Oh yeah, definitely the illegal occupation of parts of Ukraine and the illegal attacks on civilian infrastructure across Ukraine r remain a daily reality for you and definitely so many other people in Ukraine and I appreciate you taking the time to speak with us today.
Oleh:
Thank you very much for coming on The International Risk podcast today Oleh.
Oleh:
Thank you for having me.
Dominic:
Well, that was a really insightful conversation with Oleh Savytskyi he’s the campaign’s director at Razom We Stand I really appreciated hearing his thoughts on the risks associated with the continuing bypassing of sanctions on Russian oil as well as the risks posed by global dependence on fuels. Today’s podcast was coordinated and produced by Lottie James I’m Dominic Bowen host of The International Risk Podcast. Thanks for listening and we’ll speak again next week
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Thanks for thr great article!