So what do you do when a wealthy nation imposes sanctions on your chief – perhaps only – industry? In the case of Russia, the answer is to fling insults.
Here’s one from Mikhail Leontiev, a spokesman for Rosneft, Russia’s largest oil producer, though all of it doesn’t quite make sense. “In Canada the [oil] industry is in a near-death condition,” he told the Russian News Service, as quoted February 18 by The Moscow Times. “This was sanctions against the departed, and I don’t mean Rosneft, I mean Canadian oil production.”
The comment came in response to a decision by the government of Canadian Prime Minister Stephen Harper to join the European Union and the United States in imposing sanctions against Rosneft and Rostec, a non-profit Russian conglomerate that promotes high-technology for both civil and military uses.
Harper had been reluctant to impose any sanctions on either enterprise because both have key business interests in Canada. He had argued for months that any punishment should target Russia, not individual companies.
Nevertheless, Harper has frequently and publicly criticized Russian President Vladimir Putin, accusing him of engineering political and military interference in neighboring Ukraine, and on the evening of February 17 he announced the sanctions. In particular he cited “escalated acts of aggression” by Russian-backed rebels on the city of Mariupol on January 24.
“The collective sanctions imposed to date by Canada and its partners are putting real economic pressure on the Putin regime and its collaborators,” Harper said. “The cost to Russia will continue to rise if it persists in its escalation of the conflict and refuses to allow a peaceful resolution.”
The response from Russia was quick. Leontiev, the Rosneft spokesman, said Harper was merely fishing for votes from Canadians of Ukrainian descent. “Canada is a country preoccupied with its Ukrainian diaspora, a large part of which are [ultra-nationalists], that’s well-known,” he said. “There is a very strong lobby there.”
Leontiev’s curious phrasing of “sanctions against the departed” notwithstanding, he does have a point about the health of Canada’s oil industry. The 50% drop in the price of crude oil recently prompted the International Energy Agency, which advises 29 industrialized countries on energy policy, to forecast a 10% drop in Canadian oil production by 2020.
Still, insults won’t change the realities on the ground, and the sanctions, along with the plunge in oil prices, have hurt Russia’s economy as well, costing it an estimated $140 billion in 2014, according to Russian Finance Minister Anton Siluanov, and requiring a major revision in the country’s budget for 2015.
That isn’t stopping the talk from Moscow. Even the Foreign Ministry got into the act, calling Ottawa’s sanctions a “lame attempt” to undermine a cease-fire in embattled eastern Ukraine.
“We all hope that Ottawa will think about the consequences of its actions, which in reality further fuel an armed confrontation in Ukraine, and that it will realize the futility of pressuring Russia through sanctions,” the ministry said in a statement on February 18.
Originally written for OilPrice.com, a website that focuses on news and analysis on the topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.