On Whom the Economic Sanctions Are Imposed?
TRANSCEND MEMBERS, 20 Jun 2022
Possible Consequences of the Combination of the West’s Self-inflicting Economic Sanctions against Russia with the Federal Reserve Board’s Policy of High Interest Rates and Quantitative Tightening (QT)
18 Jun 2022 – This article, by referring to some of the essential arguments in the article, Sanctions by the Numbers: Economic Measures against Russia Following Its 2022 Invasion of Ukraine | Center for a New American Security (en-US) (cnas.org) and some other relevant articles, briefly discusses possible consequences of the economic sanctions imposed by the United States, other Western countries (i.e. mostly the EU countries) and their followers (such as Japan, South Korea and more) against Russia.
As far as I have read recently so far, the above mentioned article seems to be one of the most important articles, well-researched and concisely argued, especially from the economic view point but not limited to, on the economic sanctions against Russia in the current Ukraine crisis. The authors, Emily Kilcrease, Jason Bartlett and Mason Wong, extensively discuss the major critical aspects of the effects of the sanctions against Russia.
The Federal Reserve Board of the United States is now raising the interest rates and implementing the quantitative tightening (QT) in order to suppress the record high inflation rate. However, the very main cause of the high inflation rate is the sanctions against Russia, not the FRB’s policy of the low interest rates and the quantitative easing (QE) for the last few years. “High interest rates limit the amount of money available to invest. Reduced consumer confidence is another cause of global recession.” [i] The high interest rates and QT could bring about a serious economic recession[ii] not only to the U.S. but also to many other countries that are under the direct influence of the U.S. economy, and eventually to the worldwide. [iii]
Furthermore, the on-going sanctions in combination with the FRB’s policy as such could cause a financial collapse of the U.S. economy, which could lead either to the dollar collapse or to the record low dollar depreciation, as many economists are warning now[iv].
On top of that, the sanctions could also produce a more serious fuel/energy crisis, especially in the West[v] (and then, soon globally)[vi]. “Russia’s energy sector and sanctions will gradually become more viable as Europe takes further steps to reduce its energy dependence on Russia and higher prices prompt both demand destruction and some additional supply. Currently, Russia’s energy exports are generating hard currency inflows. As a result of high commodity prices and a collapse in imports, Russia’s current account will reach an all-time high of $250 billion in 2022. In a bit over a year, Russia will be able to rebuild its frozen reserves of $300 billion, despite the coordinated Group of Seven (G7) sanctions on the Central Bank of Russia. Removing energy financing for Russia would have a devastating impact.”[vii]
But, not “in a bid over a year”. It is already. Russia’s recovery is swift. For example, “The Centre For Research on Energy and Clean Air (CREA) released a report detailing that Russia made $97 billion in profit from fuel exports between February 24th and June 3rd 2022 despite the country’s invasion into Ukraine back in February.”[viii] It should also be noted that “[o]il that is being shipped to India for refinement from Russia has also been traced to European companies. These impacts demonstrate the need and Europe’s ongoing ambition to transition to clean and efficient energy, effectively halting funding of the Ukrainian war and creating sustainable living for the future.”[ix]
In addition, the sanctions could cause a huge scale of starvation[x] especially in developing countries.[xi] “The ripple effects of these unprecedented sanctions on the global economy will worsen over time, as tight energy markets become more strained, shocks to the supply of food commodities aggravate food insecurity in the developing world, globalized trade shrinks, and inflation rises.”[xii]
It seems, however, that the U.S., other Western countries and their followers do not (want to) understand that their sanctions against Russia could damage themselves and the rest of the world far more than Russia. If it may be true that Volodymyr Zelensky, the Ukrainian President, did not want to hear the U.S. information on the Russian invasion[xiii], it may also be true that the Biden administration, other Western countries and their followers do not want to hear many economists’ warning of possible disastrous consequences of their economic sanctions against Russia. It seems that they are digging a grave hole for the contemporary world economy and those victims of the starvation caused by the sanctions. [xiv]
On 17 June 2022, Vladimir Putin, the Russian President, made a speech at the St. Petersburg International Economic Forum (SPIEF). Let me quote some parts of his speech:[xv]
“The United States, having declared victory in the Cold War, declared themselves the messengers of the Lord on Earth, who have no obligations, but only interests, and these interests are declared sacred. They do not seem to realize that new powerful centers have formed on the planet in recent decades and are becoming louder and louder.
“[I]t seems that the ruling elites of some Western states are in this kind of illusion. They do not want to notice obvious things, but stubbornly cling to the shadows of the past. For example, Western dominance in global politics and economics is believed to be an eternal and immutable value.[xvi] Nothing is eternal.
“They are trying to counter the course of history. They think in terms of the last century. They are captives of their own delusions about countries outside the so-called “golden billion”: they consider everything else to be the periphery, their backyard, they still treat them like colonies, and the people who live there consider them second-class people, because they are considered exceptional. If they are exceptional, everyone else is second class.”
While seeing their sanctions causing to deteriorate many aspects of their economies and to bring about another set of starvation to developing countries, what would the U.S., other Western countries and their followers argue to counter Putin’s argument in his speech? And what actions would they take, then?
Unfortunately, so far there has been no sign that the U.S.-led Western countries and their followers will negotiate with Russia, in the foreseeable future, to improve the whole part of the world economy and other relevant problems by transforming their traditional stance of the Western dominance into the win-win stance for the whole humanity of the world.
The sanctions continue. The U.S. interest rates are raised more. QT is implemented. More people will suffer more seriously.
[xiv] Biden And The West Dug A Deep Hole In Ukraine. How To Climb Out ? | Biden stares down from Ukraine-economic ledge Twin strategic and economic crises prompt search for a way out of Ukraine trap By DAVID P. GOLDMAN—-Asian Times JUNE 17, 2022 The Biden Administration faces a double disaster after its Ukraine miscalculation, namely a US recession and a second strategic humiliation in the space of a year. The United | The Tea Party’s Front Page. | Slowly, our freedoms are being chipped away with, “We know better…” justification as its hammer and chisel. (ussanews.com)
[xvi] It can be understood that this part of Putin’s speech refers to the so-called Western exceptionalism. In this regard, let me quote from The Concept of Western Exceptionalism is Declining but… (idrakpost.com) as follows:
“The ruthless antecedents of the West, which disguise today as the global peace industry and moral police, is evident for the blind to see. Unfortunately, repentance is not the case here because even though this bloc tries to sell itself out as tolerant and peace-loving, it appears that it only plays a double standard. It has no single definition of a coup or terrorism. These terms vary according to how they affect its interest.
“The chief driver of this bloc, The United States, acts imperially with its military stationed across all corners of the world. It bombs communities and starves citizens of competing countries with sanctions, then justifies its atrocities saying, “We think the price is worth it.” Meanwhile, it continues to support coups and terror groups around the world unapologetically.”
Satoshi Ashikaga is a member of the TRANSCEND Network for Peace Development Environment. Having worked as researcher, development program/project officer, legal protection/humanitarian assistance officer, human rights monitor-negotiator, managing-editor, and more, he prefers a peaceful and prudent life, especially that in communion with nature. His previous work experiences, including those in war zones and war-torn zones, remind him of the invaluableness of peace. His interest and/or expertise includes international affairs, international law, jurisprudence, economic and business affairs, project/operations or organizational management, geography, history, the environmental/ecological issues, audio/visual documentation of nature and culture, and more.
This article originally appeared on Transcend Media Service (TMS) on 20 Jun 2022.
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