Green transition undermines US leverage

SANCTIONS ON OIL, GAS, AND OTHER CARBON-INTENSIVE COMMODITIES WILL BECOME MOOT

Sanctions targeting oil, gas, and coal will cease to be effective as the share of these in the global energy mix gradually decreases. According to the International Energy Agency, in a global net-zero scenario, the world’s demand for gas could drop by 55 percent, demand for oil by 75 percent, and demand for coal by 98 percent over the next three decades. This will weigh on the effectiveness of Western sanctions against energy powers, such as Iran, Russia, and Venezuela (see figure 1). Measures targeting the Iranian, Russian, and, to a lesser extent, Venezuelan energy sectors form a huge part of Western sanctions packages; taken together, these three countries account for nearly 20 percent of global oil production and almost 25 percent of global gas production. Climate change will also have an impact on the effectiveness of sanctions against countries that are not commodities producers. For instance, UN sanctions on North Korea include measures restricting Pyongyang’s oil imports. Such sanctions will become moot if renewable energy makes up a significant part of North Korea’s energy mix.

Western states will need to find pressure points other than energy when designing sanctions. However, this will be easier said than done. In most commodities-producing countries, the energy sector relies on a few big firms. This makes these companies obvious targets for sanctions designations, as they typically account for a large share of government revenues and are easy to identify. Once the energy transition is complete, it is unclear whether any obvious pressure points will remain. That being said, the energy transition could also entail the demise of global energy superpowers, such as Russia. This shift could weigh on Moscow’s imperial ambitions, or at least its ability to finance them, decreasing the Western use-case for sanctions on Russia.