Sanctions are a transition to competition methods that go beyond economics

11 october 2018

Sanctions set a very dangerous precedent for the world economy, especially for the energy sector with its huge and extremely expensive projects, long payback periods and asset service lives, Analytical Center experts write in their new energy bulletin.

The analysts are of the opinion that sanctions ultimately undermine the existing system of global governance and are an example of competition methods that go beyond economics. During the global crisis of 2008-2009 the big 20 managed to prevent "competitive devaluations", which could have thrown the global economy into a depression reminiscent of the 1930s, but now we are facing a new threat. Sanctions are imposed by administrations and politicians that are above and beyond any external control or generally accepted rules of the game. They are imposed based on unpredictable political motives, they are imposed for indefinite periods and their scale is constantly expanding. It is unclear yet which stage the world is at in this process at the moment, how many more iterations it is going to go through and whether there is a reasonable compromise that would allow the global community to move on from this impasse to a new system of global governance, the experts note.

Technological progress in the electric power industry in Russia and around the world in the next few years may become key to major transformations in the economy, the experts believe. In their view, the achievements in nuclear power in Russia should be supplemented by the retrofitting of thermal power plants. Modern alternative energy technologies should also be used more given the geographical spread of industrial assets and the population of the country. Another technology related task is the digitization of the grid infrastructure as demand for electricity becomes more personalized.

As for the growing demand for natural gas in China, it is accompanied by gradual liberalization of the natural gas market in that country, the experts believe. An important step in the implementation of the reform has been the launch of natural gas exchanges in Shanghai and Chongqing, which has made the country's natural gas supply system significantly more flexible. In a more distant future China may become a regional natural gas trading center as both consumption and imports there increase and natural gas is traded more and more as a commodity.

For more information see the bulletin Sanctions in the Global Energy Policy.

For other issues of the Energy Bulletin, see the Publications section.