Energy Blog

As the Russia-Ukraine war rages on, Ukraine and its supporters have urged nations and businesses across the globe to boycott Russian supplies. Russia has seemingly had the advantage in this war because of its financial prowess used to finance this war. However, sanctions from the UK, USA and the EU are beginning to bite as Russia and Russian businesses find themselves unable to access funds in several countries. The call to stop the purchase of Russian oil and gas is a powerful one intended to cripple Russia: if Russia can no longer access international energy markets, it cannot fund its war, and it is only a market of time before it loses the war.

Without delving into the legality or illegality of the war, a poignant question to ask is this, should a country continue to act in its best interest even where this contravenes public international opinion?

In answering this question, we begin from the premise that the demand to boycott the purchase of Russian oil and gas is not a legal decree, indeed it cannot be such since all countries remain sovereign. The sovereignty of a State allows it to act in what it deems to be its best interest even if this best interest is not in line with international and/or common public opinion. One might indeed recall that the agitation between Russia and Ukraine reached its height when Ukraine as a sovereign country sought to attain to NATO membership. Despite the legitimacy of national sovereignty, sovereignty has a responsibility: to citizens of the country, the international community, and the world. For instance, it is commonly accepted that climate change is a problem that affects individual countries, the international community, and the world at large. In the realm of climate change, each country owes a responsibility to other countries and the world, despite its national sovereignty. The position is often similar when there are humanitarian concerns in any one or more countries. An humanitarian crisis affects humanity as a collective despite the fact that the crisis may be limited to a particular location, as is the case in Ukraine.

Despite the call to boycott Russian oil and gas, countries remain well within their legal right to purchase Russian supplies. This purchase- at a discount in the case of oil- is arguably in the national interest for a country in an economic crisis. Although many western nations are recovering from the adverse economic impacts of the extended COVID-19 crisis, many developing nations are still struggling financially and have yet to come out of the economic downturn. The impact of COVID-19 was more severe for developing countries with GDPs reliant on the oil sector due to an extended period of depressed oil prices. Therefore, for such countries, there is an argument that it is in the national interest to purchase discounted Russian supplies despite public opinion or the consensus of the international community. However, the value of the discounted supply would determine the weight of the national interest defence. For instance, a discount of 50,000USD may hardly suffice as a national defence for any country with a measure of economic stability. In contrast, where the discount would make a sizeable impact to an economy, the defence of national interest may apply, despite international disapproval. Indeed, a commercial non-state entity may have commercial reasons for purchasing the blacklisted Russian oil. On 04 March 2022, the oil giant Shell purchased a cargo of Russian crude oil on the basis that it had ‘no alternative’ and had to make this purchase in order to meet time limits on supplies of fuel to Europe. In response to Shell’s purchase, a Ukrainian government official -Dmytro Kuleba- stated the below on Twitter:

I am told that Shell discretely bought some Russian oil yesterday. One question to

@Shell : doesn’t Russian oil smell Ukrainian blood for you? I call on all conscious people around the globe to demand multinational companies to cut all business ties with Russia.

More recently, an advisor of President Volodymyr Zelenskyy is quoted to have stated, ‘The fact is that traders are trading and they are helping Russia to receive this blood money’.

As Ukraine cannot legally compel any nation or business to cease trading with Russia, the only resort is to appeal to the court of public opinion. To a large extent, Ukraine has the express or implicit support of many Western nations, many of whom as deemed to be champions of human rights. The support of these nations to Ukraine has led to the public denunciation of companies, traders, and nations continuing to do business with Russia. Yet, despite this court of public opinion, businesses and nations are sometimes hindered from towing the conventional line due to contractual, economic and practical limitations. A business or nation may have no choice but to purchase Russian supplies because there is no readily available alternative, and it has contractual obligations which impose severe fines for delayed performance. The appears to be what Shell alluded to last month in noting that it had no alternative. Similarly, developing countries in an economic downturn may find themselves unable to resist cheaper supplies from Russia where the discounted amount is substantial and has a meaningful impact on their economy.

In seeking to preserve its national interest to win the war, or at least increase its chances of winning the war, Ukraine’s appeal to traders, businesses, and other nations, is to boycott Russian supplies even at the expense of their own national or commercial interest. This appeal is made on the basis that Ukraine is seen here as the victim of Russian aggression, and as such, the world must rally to its defence by turning their back on the commercial activities of the aggressor, Russia.

Yet, in turning the back to the perceived aggressor, we must not ignore the severe economic and contractual consequences on nations and businesses who are struggling to backlist Russian oil and supplies. The court of public opinion is often sentimental and imbalanced, having a tendency to support the party crying or shouting the loudest. The situation in Ukraine is a humanitarian crisis, and as human beings, we have a responsibility to plead the cause of the vulnerable and to stand with those oppressed. Nevertheless, a country and/organisation may genuinely oppose the activities of Russia in Ukraine, and yet find itself in a position where it has to purchase supplies from Russia due to circumstances far beyond its control. The purchase of Russian supplies is not always tantamount to support of Russia or to disregarding the humanitarian crisis in Ukraine. The test is to carefully examine holistically whether such country/party has a reasonably justifiable defence in the light of its prevailing economic, social, contractual, and humanitarian obligations.