Who is sanctioning who - The current EU energy crisis

“None of you seem to understand. I’m not locked in here with you. You’re locked in here with me!” - from the Watchmen comic

This quote from the Watchmen seems to fit the current European energy crisis. Everyone thought that sanctions would bring the Russian economy to its knees, yet the tables seemed to have turned with Russia turning off its natural gas to Europe. Gas is flowing to the rest of the world, but not to the EU. It is Europe who is suffering from sanctions. 

The policy failure of 2022 is not inflation, but the inability to anticipate the potential for reverse energy sanctions on the developed world. Energy sanctions trump broad economic sanctions for those countries that not energy independent.

There is no question the Russian economy is suffering, yet the trade balance is in surplus and cash is still flowing to Russia. Germany is seeing the balance of trade reverse, and the rest of the EU with the UK is now having to deal with subsidies to bail-out households, industries, and energy companies. Central banks need to plan for financial emergencies for power and energy companies as margins increase and liquidity is found to be in short supply. 

While governments are developing tactics to address energy logistics, the strategy issues of longer-term energy policies are only beginning. A fundamental role of a good functioning government is to ensure cheap and uninterrupted power for citizens. It is not a right, but is a responsibility for governments to ensure the system can provide power. An economic system failure increases dramatically without a good energy policy which focuses on reliability and cheapness. Green may be good, but reliability is critical.