Posts Tagged ‘Economic Warfare’

U.S. is losing high-stakes sanctions war w/Russia

November 19, 2022

When Russia invaded Ukraine, President Biden threatened “sanctions from hell.”  His goal was to destroy Russia’s ability to carry on a war effort by wrecking its economy.

This didn’t seem far-fetched.  Russia ranked only 11th among industrial nations in terms of output.  It alternated with Ukraine in ranking as the poorest and most corrupt nation in Europe.  Its government and its companies were considered bureaucratic and inefficient.

If the United States had been able to rally the world behind its effort, it might have succeeded.  But it failed.  The sanctions effort was limited to the USA and its core allies.

The sanctions damaged the Russian economy, maybe permanently, but for now Russia still has both the means and the will to continue the war.

Far from wrecking Russia, the sanctions war is wrecking the economies of Europe.  U.S. demands are pushing allies and bystander nations into the arms of China and Russia.  Sanctions are hurting the American people as well as the Russian people.

Two sayings come to mind:

  • If you strike at a king, you must kill him.
  • That which does not kill me makes me stronger.

Al Jazeera reported that the sanctions included freezing nearly half of Russia’s financial reserves, expelling several of the country’s largest banks from the SWIFT payments system, prohibiting Russian ships and planes from entering their ports and airspace, introducing export restrictions for certain advanced technologies, and placing an embargo on Russian oil and coal.

The BBC reported that the US barred Russia from making debt payments using foreign currency held in US banks.  The UK has excluded key Russian banks from the UK financial system, frozen the assets of all Russian banks, barred Russian firms from borrowing money and placed limits on deposits Russians can make at UK banks.

The BBC reported that Western nations have announced these sanctions:

From December, the EU and the Group of Seven (US, Canada, UK, France, Germany, Italy, Japan) also want to cap the price countries pay for Russian oil.  They are telling importers of Russian crude oil that western insurers will not cover oil shipments if they pay more than the cap.

The BBC also reported that the US, EU, UK and other countries have sanctioned more than 1,000 Russian individuals and businesses – including so-called oligarchs.  These are wealthy business leaders who are thought to be close to the Kremlin, such as former Chelsea FC owner Roman Abramovich.

Simultaneously, more than 1,200 foreign companies have either suspended or curtailed their operations in Russia since the start of the conflict in Ukraine, according to a database from Yale University’s Chief Executive Leadership Institute.  Among the big names on that list are brands such as Apple, McDonald’s, IKEA, Visa, and MasterCard.

The new supply restrictions have not only caused inflation to climb into the double digits, but also undercut Russian manufacturers by depriving them of imported components that are critical to assembling their final products.  Russia’s car production, for instance, plummeted by a stunning 61.8 percent during the first six months of this year, according to Al Jazeera.

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Russia soon will be able to cut off Europe’s gas

April 14, 2022

Why is President Biden widening the economic war against Russia to include China? Why is he threatening to impose economic sanctions on countries who refuse to sanction Russia? Why is he raising the. stakes?

It may be because the United States is in a struggle for world power against not only Russia, but China, and that time is not on the side of the USA.

China’s Belt and Roads Initiative, also known as the New Silk Roads, is intended to bind together Russia, Iran and other nations in the interior of Eurasia by means of roads, railroads and oil and gas pipelines.

The result, if the Chinese can bring it off, would be a new entity that would be invulnerable to U.S. sea and power and that would be detached from the dollar-based world economy.

But that entity does not exist yet.  Specifically, there is a lack of sufficient gas pipelines to enable Russia to switch over the gas it is now selling to Europe and sell it to China instead.

Source: Seeking Alpha. (2020)

Source: S&P Global Commodity Insights (2019) Click to enlarge.

Source: Wood Mackenzie (2019) Click to enlarge.

Russia is rushing to build new pipelines that will connect its western and eastern Siberian gas fields and free it from the need to sell to European markets.   They’re scheduled to be completed in a few years, and then Russia will be in a position to cut off gas supplies to Europe.  

Pepe Escobar noted:

An absolutely key issue for Russia is how to make the transition to China as its key gas customer. It’s all about the Power of Siberia 2, a new 2600-km pipeline originating in the Russian Bovanenkovo and Kharasavey gas fields in Yamal, in northwest Siberia – which will reach full capacity only in 2024. And, first, the interconnector through Mongolia must be built – “we need 3 years to build this pipeline” – so everything will be in place only around 2025.

On the Yamal pipeline, “most of the gas goes to Asia. If the Europeans don’t buy anymore we can redirect.” And then there’s the Arctic LNG 2 project – which is even larger than Yamal: “the first phase should be finished soon, it’s 80 percent ready.” An extra problem may be posed by the Russian “Unfriendlies” in Asia: Japan and South Korea. LNG infrastructure produced in Russia still depends on foreign technologies.

It makes no economic sense for European nations, including Ukraine, to cut themselves off from Russian gas.  The U.S. plan is to substitute liquified natural gas (LNG) from the USA.  Ultimately the best solution would be to substitute renewable energy for gas heating.  But the physical infrastructure to do these things is not in place.

In fact, the ongoing mutually destructive economic warfare makes no sense for anyone, especially for the USA.  We the American people get no benefit from economic warfare against other nations.  We need to be rebuilding our own economy and preparing for the coming bad years.

LINKS

Sit back and watch Europe commit suicide by Pepe Escobar for The Cradle.

Gazprom Is Setting Up for Eurasian Gas Market Dominance by Zoltan Ban for Seeking Alpha (2020).

Russia is building a massive 50 billion cubic meter gas pipeline to China by Ameya Paleja for Interesting Engineering.

Russia said it’s pushing ahead with building a massive natural-gas pipeline to China by Grace Dean for Business Insider.

Russia, China agree on 30-year gas deal via new pipeline, to settle in euros, by Chen Aixhu for Reuters.

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Russia is losing an economic war

September 26, 2016

The Russian Federation is in economic crisis.

The economy is shrinking.  Although unemployment is low, poverty is increasing,  Inflation is at double-digit rates.   The exchange rate for the ruble is falling.  Russia’s trade deficit is widening.  The Russian government is cutting spending on public services.

While Russia has serious internal economic problems, the immediate cause of the crisis is the economic war being waged by its foes.

  • The United States and European Union boycott many Russian individuals and institutions, including cutting off credit to Russian banks and cutting off sales of equipment to Russian oil companies.
  • Saudi Arabia has stepped up production of oil, driving down oil prices worldwide and hurting Russia’s oil exports.
  • The United States has begun a new arms race with Russia, forcing the Russian government to either divert resources from the civilian economy or admit inferiority.

03-bust-boom-bustIn waging economic war against Russia, the United States and its allies hurt themselves as a price of hurting Russia more.

  • Europe and Russia are natural trading partners, with Europeans buying Russian gas and oil and Russia buying Europe’s, especially Germany’s industrial products.   Cutting off this trade hurts both.
  • Saudi Arabia is using up a large but limited resource at a fast rate without getting the best price for it.
  • The United States, too, is diverting resources from our civilian economy and domestic needs.

In many ways, this is a replay of the economic war waged against the Soviet Union in the 1980s.

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