A widening ban on Russian oil products will put heat on Putin to negotiate

[PRINCETON, NEW JERSEY/PARIS] Russia's brutal shelling of Ukrainian cities continues. Thousands are dying, millions are suffering. Yet the West remains paralysed about further action on what matters most: sanctions on Russian energy exports. Absent an immediate and full boycott of Russian gas and oil by Western countries, the best way forward is to commit to a ladder of sanctions that they will climb in a pre-announced fashion over the coming weeks.

The initial response of the West to the Russian invasion was swift, strong, and impressively unified. But it is becoming glaringly obvious that it is also insufficient. The effects of the initial sanctions shock on the Russian economy are fading. In recent days, the rouble's exchange rate first stabilised and then appreciated sharply, while government bond yields have fallen back. The consensus forecast for Russia GDP growth in 2022 stands at minus 8 per cent - a sharp contraction, but hardly a collapse.

It is not hard to understand why the Russian economy and President Vladimir Putin's regime have been able to withstand the sanctions so far. Energy exports - a crucial source of income for the Russian state - remain excluded from the sanctions list. In fact, surging energy prices have brought massive windfall gains to the Kremlin. In February, as Russia prepared and launched its invasion, the country's current account posted its highest monthly surplus in 15 years.