Will Western sanctions deal a fatal blow to Russia’s economy? — Analysis
The situation may not be as dire as initially thought, despite the harsh economic sanctions Russia imposed over Ukraine
By Chad JohnsonA political analyst
“We are crippling Putin’s war machine by denying him access to the money & support he needs to fund his illegal war,”Liz Truss is the British Foreign Secretary tweeted on Thursday.
Western audiences would be hard-pressed to question the authenticity of this tweet. It is widely believed that the US has joined forces with its allies to impose harsh sanctions on Russia as a response to the crisis in Ukraine. This involved blacklisting many wealthy Russian businesspeople, often referred to as ‘oligarchs’, freezing the assets of Russia’s Central Bank, expelling some banks from SWIFT, closing airspace to Russian planes, as well as many more sanctions.
These combined measures give the impression that Russia will eventually be crippled by the special military operation against Ukraine. However, all things are not as they seem. Beyond the fanfare and triumphalism of Western propaganda – which has become an echo-chamber owing to the censorship they have installed against anything that runs against the narrative – a more nuanced reality is beginning to emerge which reveals that Western sanctions have failed to deliver the knockout blow required to fatally wound the Russian economy, or to upend any of its most important sectors. Even though Moscow’s position is fragile, it is stronger than the West would like.
The European Union does not, at this time, have the political will or the strength to place an embargo against the Russian imports of oil and gas. This is despite all of the excitement about its newly found unity. Although some in the East were more vocal about this demand, it was not possible to reach consensus. Germany publicly stopped any Russian energy bans, warning that they could lead to economic disaster.
While there is some hope for far-flung deals between Qatar and the United States, it has not been proven feasible due to the geographical distances and inconvenient of these vendors. Their prices and feasibility will also be significantly lower. This proposal has not eased the anxiety concerning the markets, which along with the conflict has led to a global surge in natural gas and crude oil prices, playing to Russia’s own gain meanwhile.
Identifying Europe’s strategic weakness, this has allowed Moscow to strike back with a countermeasure. President Vladimir Putin announced on Wednesday that Russia would accept payment for gas exports to “unfriendly countries” in rubles only. Natural gas prices shot up again after this announcement.
It effectively means that countries in Europe dependent on Russian gas would have to purchase Russia’s currency first, strengthening its role in international markets, and in turn, driving up the value of the ruble. After the announcement, Russia’s currency rose rapidly to an unprecedented high of 95 rubles for every dollar. It has now fallen below 100. In February, the ruble dropped to historic lows at 132 rubles per $1 and 147 Rubles per Euro. The exchange rate was at 75 rubles per $1 and 85 rubles for each euro before the February military operation.
This demonstrates that Russia’s economic situation is not as bad as initially expected.
In addition to this, the US and its allies have not achieved the global isolation of Russia’s economy to the extent they claim. Western commentary has an annoying habit of exaggerating disapproval from the West alone as representing the will of the ‘international community’ or affirming ‘international isolation’. Two critical points are that the US and its allies were unable to prevent India and China from buying Russian oil. India, in spite of US threats, is actually now purchasing more Russian oil. Moscow has also received support from the Persian Gulf countries, which include Saudi Arabia, United Arab Emirates and Bahrain.
Russia’s economy will undoubtedly take some hits from the sanctions, but one month since the start of the operation in Ukraine, its most critical sectors remain largely unscathed.
The West ultimately cannot completely ban Russian oil and gas without unleashing a catastrophe in the global markets which would induce massive collateral damage, hence the US reportedly resorted to asking Nicolas Maduro – the leader of Venezuela, who they have attempted to depose – to increase oil supplies.
Russia has the time and money to do this, as well as finding new markets and diversifying currency transactions. India and China will have the largest roles, but Vietnam, Pakistan and several other Latin American and African countries will also play important roles.
These opinions, statements and thoughts are the sole opinion of the author. They do not necessarily reflect those made by RT.