Guidelines for the Nobel Prize in Economics for Europe to adapt to life without buying oil and gas from Putin

The speed and intensity of economic and financial sanctions determined against Russia would be effective, but Europe should stop buying Russian oil and gas, said Joseph Stiglitz, winner of the Nobel Prize in Economics.

In an interview with AFP in Paris, the economist said on the sidelines of the conference on the future of Europe, the impact of sanctions on the economy “[Russia's] ability to war (...) This will change,” he said. “They lost a significant amount of military equipment and (...) It will have to be replaced, but do they have industrial and financial capabilities? It's debatable.”

One of the main factors of the potential success of a sanction is “how quickly the sanctions were imposed.”

Stiglitz, who welcomes the speed with which Europeans acted after the invasion of Ukraine, said: “If implemented gradually, [Russians] can adapt.”

However, he believes that it is “difficult” to know whether the impact of sanctions on the Russian population and oligarchy will allow Vladimir Putin to ease his position on Ukraine and the conflict he initiated. For sanctions such as import restrictions, the departure of some foreign companies or the devaluation of the ruble, “there is too much propaganda for false information that Russian citizens accuse the West and not Putin.”

However, he believes that Europeans should “stop buying Russian gas and oil,” which makes it easier for the regime to finance the war in Ukraine.

According to him, the impact between European countries, which are more or less dependent on Russian gas, “can be compensated by sharing the burden.”

At the moment, the European Union excludes the suspension of Russian oil and gas purchases, a measure already taken by the Biden administration in the United States. Some countries, such as Germany or the Baltic countries, which import more than half of the gas from Russia, do not have a short-term alternative.

The economist said that Europe and the United States could “put enormous pressure on Saudi Arabia, Abu Dhabi or the United Arab Emirates and ease sanctions against Iran and Venezuela for additional oil supplies.”

He also considered that Europe and the United States should “do what they can to protect the countries and individuals most affected” by sanctions on their territory.

“In some democracies, there are groups that can suffer [from sanctions] and demonstrate, and political parties that can take advantage of these protests.” He warns, calling for a common action against the budget at the European Union level.

Former economic adviser to former US President Bill Clinton said at the meeting that China's position will be important in ensuring the effectiveness of the sanctions.

China's support for Russia worries the United States. The White House stated that if a country provides support to Russia, it “made it clear to China that we will not do anything”. China said it does not want to be affected by “opposing” sanctions.

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Concerns about “disproportionate” inflation

In the context of sanctions and the acceleration of inflation caused by the war in Ukraine, especially in the context of energy and commodity prices, the 2001 Nobel Prize in Economics considers the concern “unbalanced”, considering that this phenomenon of price increases will be temporary.

“From a political point of view, it's a problem,” he says. But “there is no economic reason to worry about inflation levels of 5 or 6%, or even 7 or 8%,” he says.

Stiglitz pointed out that there are no conditions in place for a vicious cycle of rising prices and wages, and the market expects a fall in inflation in the medium term.

(Information from AFP/Marie Hurin)

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