Letter published in Science on how to weaken Russian oil and gas strength

Bruegel is pleased to announce the forthcoming publication in Science of the Letter ‘How to weaken Russian oil and gas strength’, co-authored by Bruegel director Guntram B. Wolff and Senior fellows Simone Tagliapietra and Georg Zachmann, together with Ricardo Hausmann, Agata Łoskot-Strachota, Axel Ockenfels and Ulrich Schetter.

Oil and gas exports revenues, estimated at around USD 1 billion per day, represent Russia’s key geopolitical and economic strength. The European Union is the first buyer of Russian oil and gas. The Letter argues that to weaken Russian oil and gas strength while minimizing impacts on its own economy, the EU should rapidly introduce a tariff on Russian oil and gas imports. The tariff can be adapted to the economic and political dynamics of the conflicts.

“A tariff’s effect on domestic prices depends on the relative elasticities of supply and demand. Russian oil and gas exports to Europe are inelastic because infrastructural bottlenecks prevent a substantial re-direction to Asia. The EU therefore has a real chance to ensure that tariff revenues are mostly paid by Russia” says Guntram B. Wolff.

“To improve its position, the EU needs to increase its demand elasticity. This can be done by incentivizing a reduction of oil and gas demand in Europe and by increasing the use of all available alternative energy resources” says Simone Tagliapietra.

The Letter will be published in Science on 29 April, 2022, and the DOI for it will be as follows: http://www.science.org/doi/10.1126/science.abq4436.

The Letter is under embargo until 2:00 p.m. U.S. Eastern Standard Time on Thursday, 28 April.

A working paper on the subject will also be published by Bruegel at the same time and the DOI for it will be as follows: https://www.bruegel.org/2022/04/cutting-putins-energy-rent-smart-sanctioning-russian-oil-and-gas-