National Interest: Sanctions hurt the West more than Russia

An economic response against Russia is likely to do more damage to the rest of the world than Russia.

This is stated in an article by Alvaro Vargas published by The National Interest last Sunday, July 24, where the author pointed out that things on the economic front seem different from the repeated assurances of President Biden and other Western leaders that they think that these are “the most severe sanctions in economic history” that would have paralyzed the Russian economy and starved out the war machine, since the writer admits that this “didn’t happen.”

The writer says in his article: “Russia’s current account, which measures global trade in goods and services, was strong in the second quarter of this year, with a trade surplus rising to a record $70.1 billion. The ruble also showed remarkable resilience, ranking first. . being the strongest A currency this year, it has risen to its highest level against the euro since 2015 and has made significant gains against the dollar.

What are the reasons for inflation of Putin’s treasury? The answer is simple: rising commodity prices and Russia’s continued ability to export oil, gas, grain and even gold to non-Western countries.

The economic picture is not rosy for countries imposing sanctions on Russia as Europe struggles to meet its energy needs, driving up inflation and forcing the leading countries at the forefront of the green movement to retreat. For example, Germany, whose economy and climate change minister is a member of the Green Party, had to reopen 17 coal-fired power plants that it had previously shut down.

Recently, President Biden, as inflation hit a 40-year high, begged the leaders of Saudi Arabia, the regime he shunned, to help him by pumping in more crude oil to help bring down oil prices and ease inflationary pressures that higher oil prices are bringing to bear on prices. fuel than other goods.

In short, Russia’s economic response to the war seems to be doing more damage to the rest of the world than Russia itself.

Western leaders now had to learn to consider two factors when imposing sanctions: morale and possible social and economic consequences.

In this case, there was clear tension between them, as the moral argument demanded the maximum possible isolation of the Russian economy, but given the current imbalance in supply and demand, which became apparent with the world’s exit from the epidemic and rising inflation. , the socio-economic calculator should have indicated the system. Sanctions will not allow problems to aggravate (there was no way).

However, this did not happen: the combination of sanctions and war disrupted the supply of energy and grain, creating economic opportunities that Russia took advantage of. In fact, according to the Helsinki-based Center for Energy and Clean Air, in the first three months of the war alone, Moscow generated $100 billion in revenue from the sale of oil, gas and coal.

While the Biden administration was withdrawing the Strategic Petroleum Reserve to increase existing stocks and lower gasoline prices, the emergency reserve in the United States of America fell to its lowest level since the mid-1980s, at a time when exports Russian oil returned to pre-war levels with mayonnaise.

Meanwhile, Europe, which imported 40% of its natural gas from Russia last year, is facing a double whammy in the form of acute shortages due to reduced Russian imports and rising inflation, partly fueled by energy prices. This could lead to a long, cold winter when energy demand rises sharply as Europe prepares to stop importing offshore oil from Russia, as required by an EU ruling introduced in June. And things could get even worse if Russia decides to stop exporting natural gas to Europe via pipelines, which is temporarily allowed by an EU decree.

The big picture can be seen in the numbers. In February, when the military operation began, the Fed’s global commodity index was 203, by the end of June it was 227, up 12%. Instead of starving the Russian war machine, rising commodity prices have strengthened the Russian financial system.

The idea was that the West would help Ukraine win the war, or at least make further military operations too costly for Russia, and although it is too early to judge a military conflict, Russia is not one iota economically untouched.

Source: national interest

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