1/ While news items about falls in the Russian stock market and exchange rate may rejoice some observers, the hard reality is that Russia has much higher macroeconomic resilience than Western nations in terms of its external balances and fiscal position.
2/ Over the 2014-2016 period, sanctions played a minor and secondary role in damaging the Russian economy. Oil price changes mattered more, falling from around 100 to around 50 dollars per barrel between July 2014 and December 2014 - and below 40 in early 2016.
3/ While the "break-even price" is a moving target - because fiscal and macro policies can be adjusted - it was the case in early 2016 that the oil price was so low as to force serious re-ordering of Russian priorities.
4/ Since mid-2021 we've seen oil prices systematically above 70 - and Russia's external macroeconomic positions are strong. Sanctions on banks and sovereign debt, and on currency operations, are good ideas, and stringent export controls are a good idea too.
5/ But the question remains: where Russia is at its weakest, meaning revenues from oil and gas exports, is there something that we can do? The answer is yes.
6/ The EU could impose an import tariff on imports of Russian oil and gas - and use the revenues, in part to cross-subsidise imports of oil and gas from other suppliers, and in part to finance necessary energy infrastructure adaptations.
7/ Such a tariff could be set to automatically increase every year, e.g. 20%, 30%, 40%, 50% and so on. In the space of a few years, the entire dependence on Russia would be gone. Russia would incur enormous costs to redirect its energy export infrastructure to Asia.
8/ And in Europe, delirious projects such as Nord Stream 2 and their related pernicious effects on European security and solidarity would end. And after that, there isn't much that Russia produces that Europe would need at all. We would be decoupled.
9/ Note that this would be a painful adaptation, but deliberately not a death sentence for either side. Other markets would still be there, and no attempt should be made to prevent Russia from exporting to any other market.
10/ And while Russian industry counterparts will be busy transitioning at gigantic cost, they will remember: they had it so good, they had the perfect market, rich, friendly, pliable, corruptible even. And their reckless leaders threw it all away.
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