Russia may have the last laugh
Published on: Sunday, March 27, 2022
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Credit: lonelyplanet.com
What else could it be when the great romantic composer Tchaikovsky is sanctioned for being Russian.
Tchaikovsky died in 1893! Other sanctions on Russian individuals include that on owner of the Chelsea Football Club and of course President Putin himself.
During the United Nations resolution to sanction Russia, most countries of the global south and particular the BRICS countries abstained.
Those abstaining represented most of the world population, but still sanctions were imposed on the hypocritical notion of “democracy”.
Russian sovereign reserves was frozen, the Russian swift financial system was partially disconnected, western companies were ordered to leave Russia and most Russian exports embargoed by the US.
The Russians did make a point that freezing foreign reserves of a sovereign country is an act of war and questioned the legality of the such sanctions on a G20 country.
Withholding reserves by any bank is in effect defaulting on its obligations.
What has since unfolded is pivotal to world geopolitics which has fractured the global financial system and the US dollar as the preferred world currency.
The idea that sanctions will bankrupt the Russian economy and possibly effect a regime change to replace Putin is delusional.
The ruble did take a hit. This forced the Russian Reserve Bank to increase interest rates to 20pc and impose capital controls.
There has been no run on Russian banks and the ruble has since stabilised, though there will be hardship for Russian people in months to come.
Having said that, President Putin does enjoy an approval rating that exceed 70pc and this has apparently increased since the start of this crisis.
The Russian economy is already showing signs of recovery, KFC has transitioned to “Kremlin Fried Chicken”, the Mcdonalds to “McPutins” and the Coca Colas to “Voda Vodkas”.
Visa and Mastercard has been replaced by the Russian Mir payment system and UnionPay from China. The industrial economy will take a little longer to adjust, but adjust it will with China at its back.
Russia has massive foreign currency reserves and since 2018, has reduced its exposure to US$ dramatically as a means to “sanction proof” its economy.
Russia has the biggest natural gas reserve in the world with nearly 47,805 billion m³ and exports 196 billion m³ annually. Of the top 10 gas producers, only 3 countries – Qatar, US and Turkmenistan – are “friendly” to the west and none can produce enough gas to meet European demands.
Due to its vastness, Russia also has oil, coal, palladium, platinum, uranium and other minerals required in the manufacture of microchips and batteries, and is arguably the main producer of wheat, barley, corn and fertiliser (Urea and potash) in the world. Europe relies much of its energy (oil and gas) and food from Russia.
The Russian President announced “unfriendly countries” will now have to make payments for its energy in Rubles, which I’m certain the Europeans didn’t see coming and will exacerbate the European economies.
Russia has continued to honour its contract to supply pipeline gas to Europe.
The recent visits by the British Prime Minister and other European ministers to the Gulf states in search for replacement energy from Russia, does make one wonder whether this whole idea of sanctions had been miscalculated.
February economic figures from Britain confirm inflation at 6.2pc and beginning April household energy bills will increase by a minimum of 54pc.
Inflation in Europe will hit double figures this year and possibly drag their economies into a recession. Europeans who think they will find cheaper alternatives to Russian energy might as well “cut their nose to spite the face”.
President Biden arrived in Europe and his meeting with Nato leaders was described by Reuters as somewhat “sober mood”.
This suggest to me unease, recriminations and possibly increasing divisions given the failure of this “economic war of attrition” on Russia.
Kedayan, Weston
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