Biden’s policy errors could affect Korea
The author is a columnistat the JoongAng Ilbo.
The Russia-Ukraine war has delivered unintended consequences and a change in mood globally. U.S.-led sanctions to stop the invasion of Ukraine stoked the worst inflation in decades, while the approval rating of U.S. President Joe Biden has plummeted. Korea-U.S. relations have been affected, and the global order has been shaken. This demands closer study.
The United States has been fully backing the government of Ukrainian President Volodymyr Zelensky, counting on the weakening of Russia and the Vladimir Putin regime from the war, where Ukraine has defended itself far better than expected. Washington had first been passive in supplying weapons over fear of expanding the conflict, but ended up assisting Ukraine with choppers and armored vehicles after witnessing the brutality of Russian forces. The U.S. is estimated to have provided $5.6 billion of weapons and other resources to Ukraine. It also supplied $914 million of humanitarian aid in the form of water, medical supplies and other daily necessities.
After Ukraine stood up against Russia’s relentless offensive for more than two months, Biden in May upped the stakes. He ordered an import ban on Russian crude oil and natural gas. The move was expected to deal a critical blow to Russia as Russians rely heavily on revenues from oil and gas exports.
Energy-related raw materials accounted for 42.8 percent of Russia’s total exports last year. Republican Senator John McCain, who lost to Barack Obama in the 2008 presidential election, called Russia “a gas station masquerading as a country.”
Sanctions on oil and natural gas were expected to slash fiscal income for Russia and funding for Putin’s war. The Biden administration also bet on anti-war sentiment in Russia on a surge of casualties.
The U.S. may also have calculated benefits to U.S. energy companies. With shale gas discoveries and exploitation, the U.S. has turned into an energy exporter from an importer. The ban on Russian oil and natural gas would result in revenue and benefit to American energy producers.
Washington was certain that the U.S. would be able to humble the Putin regime and got NATO member states, Australia, New Zealand, Korea and Japan on board with the sanctions.
But the outcome missed the mark by a wide margin. Although Russia lost Europe and other regions for exports, its revenue from oil shipments increased. Crude has become dear due to the ban on energy supplies from Russia. To counter the sanctions, Russia began to sell its production cheaply at a time when international crude prices soared. It sold crude more than $30 cheaper than Brent, West Texas Intermediate and Dubai Crude. Countries unaligned with the U.S. rushed to grab cheap Russian oil, bolstering Russia’s energy income.
Brazil, India, China and South Africa — the other BRICS — were primary customers for Russian fuel. India has been the most avid buyer. The country procures 740,000 barrels per day these days, which is nearly 20 times last year’s daily average of 38,000 barrels. New Delhi is suspected of stocking cheap Russian oil for resale at higher prices. Brazil also has defied the U.S. call. President Jair Bolsonaro went ahead with a visit to Russia to meet with Putin in February despite Washington’s opposition. China and South Africa also are major customers for Russian oil.
During a Senate hearing on June 9, U.S. energy security envoy Amos Hochstein acknowledged that Russia might be earning more revenue from fossil fuels than before its invasion of Ukraine.
What caused the misjudgments of the Biden administration? Many blame them on bad lessons from the past. Biden’s foreign policy team — Secretary of State Tony Blinken and National Security Advisor Jake Sullivan — designed sanctions on Iran during the Barack Obama administration that proved to be effective. Based on their experience, they were sure of the effect of economic sanctions on Russia. Washington in 2015 had succeeded in defeating Iran with lengthy sanctions to force a deal to suspend its nuclear program.
But the sanctions on Russia were different. They were not accompanied by a secondary boycott that also punishes companies that buy energy from a country under sanction. As a result, anyone could purchase Russian oil and gas due to the lack of binding force.
Due to the rhetorical sanctions, countries who did not go along were not disadvantaged. In fact, they benefited from cheap and abundant supplies from Russia, whereas countries that joined U.S. sanctions are grappling with multiyear-high inflation from expensive fuel.
In the U.S., gasoline soared above $5 a gallon. It had been $1 before the war. The consumer price index jumped 8.6 percent in May on year, the steepest gain in 41 years. The monstrous inflation has been hard on Biden’s approval rating. It fell to 40.2 percent on his 500th day in office, lower than President Donald Trump’s 41.5 percent. At this rate, the Democratic Party is headed for a major defeat in midterm elections in November and cannot dream of winning a second presidential term two years from now.
Easing sanctions on China
The Biden administration has gone all-out to fight inflation. It is even mulling an easing of high tariffs on Chinese imports — tariffs levied by the Trump administration. High tariffs on Chinese imports have been criticized for fanning inflation while doing little to damage the Xi Jinping regime.
Biden plans to visit Saudi Arabia next month to request an increase in crude output. He will be meeting with Crown Prince Mohammed bin Salman, whose country he had vowed to make a “pariah” for the 2018 murder of Jamal Khashoggi, a Saudi dissident.
At home, he lambasted energy majors like Exxon, blaming them for doing little to tame the prices when they were making “more money than God.”
Biden’s latest endeavors won’t likely help greatly to contain inflation. The sanctions have fanned fuel prices, but have not hurt Putin. Putin’s war chest is big enough to continue the war. On the other hand, Biden may come under pressure to throw in the towel. In that case, the Ukraine war will likely end in Russia’s favor.
The impact on the alliance
What would be the consequence for Korea if the U.S. government’s misjudgment causes devastating inflation in the U.S. and globally? Biden would try various policies to restore popularity ahead of the midterm election and may seek help from Korea. Big Korean companies like Samsung Electronics and Hyundai Motor may be asked to make more investments in America. While lowering tariffs on Chinese imports, Washington could be tempted to create other troubles with Beijing to divert attention.
Benevolence comes during the good times. The United States grappling with high inflation could lead to heavy demands on Korea and other allies.