The Smartest EU Sanction on Russia by Daniel Gros

 The Smartest EU Sanction on Russia by Daniel Gros

In the face of Russia’s aggression in Ukraine, Europe’s leaders have been scrambling to devise “smart sanctions” – measures that inflict maximum pain on Russia and minimal pain on the EU. A tariff on gas imports from Russia has a lot to recommend it.

FLORENCE – As Russian forces continue to shell civilian areas of Ukraine indiscriminately, the question of whether the European Union – or individual member states – should ban gas imports from Russia is becoming increasingly urgent. While the United States has already taken that step, a ban in Europe – which purchased nearly three-quarters of Russia’s natural-gas exports last year – would do more damage to Putin’s war effort.

But a ban on Russian gas imports would also carry very severe short-run economic consequences for Europe, to the point that it might not be sustainable. Fortunately, there is another way, which would minimize economic disruption in the EU: the bloc can introduce an import tariff on Russian gas.

In normal times, such a tariff would violate World Trade Organization rules. But, given Russia’s aggression, the EU could invoke the national-security exemption contained in Article XXI of the General Agreement on Tariffs and Trade. Moreover, Russia has long imposed a 30% export tax on gas. The EU can claim that its import tariff simply compensates for this distortion.

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