“The West's goal of destroying the Russian economy remains as distant as ever”
For some reason, the fighting in Ukraine causes less controversy in the West than the effectiveness of sanctions against Russia. It is already obvious that the main goal of the United States and its allies is not the defense of Ukraine, but the defeat of Russia, which is not the same thing. And numerous and varied sanctions have not led to the destruction of the Russian economy, not to mention the change of power. President of the All-Russian Police Association, Lieutenant General, Doctor of Law, Honored Lawyer of Russia, Professor Yuri Zhdanov spoke about how the effectiveness of sanctions is assessed by American analysts.
– Yes, there is a comprehensive report published on June 16 by the Center for a New American Security (CNAS) on economic measures against Russia after the start of the conflict in Ukraine in 2022. Its authors – Emily Kilkreese, Jason Bartlett and Mason Wong – calculated that there were 229 sanctions in the banking sector, 8 in energy, 32 in technology, 480 in defense and transport. There are also personal sanctions against the Russian elite and oligarchs – 663.
To date, the report noted, one of the most significant actions has been the imposition of sanctions on the Central Bank of Russia by the G7 and other economies, which effectively cut Russia off from access to assets denominated in currencies. In total, the administration of US President Joe Biden imposed more than 1,500 discrete sanctions against more than 800 targets related to the special operation.
In addition, almost 1,000 foreign companies “self-sanctioned” by closing or curtailing their activities in Russia, which , in their opinion, contributed to the financial isolation of Moscow from the world economy. But it is not possible to isolate the 11th largest economy in the world, which is causing a quiet panic among “quiet” Americans for the time being.
– Yes, they were introduced in batches or waves. It turned out to be a real storm.
– Eight. The first wave is a reaction to Russia's recognition of the Donetsk and Luhansk republics. The second is major banking sanctions and export controls in response to Russia's special operation in Ukraine. The third is personal sanctions against the head of state and elites, the Central Bank and SWIFT. Fourth – additional sanctions against Belarus, control over the export of oil and gas and new inclusions in the lists of legal entities. Fifth – bans on Russian oil and gas. The sixth is the abolition of Russia's advantages in multilateral economic organizations and further trade and investment restrictions. Seventh – sanctions against deputies of the State Duma of the Russian Federation and the State Duma itself. Eighth – additional full blocking sanctions against Russian financial institutions, investments, state-owned enterprises, the elite, and certain types of energy imports. Perhaps there will be a “ninth wave”.
– In fact, such sanctions are few in number, but they are the most significant in terms of significance. Can the arrest of the yacht of some oligarch compare with the refusal to import oil?
The West is really focusing on the impact on Russia's energy sector. And at the same time, he is terrified of the impact on himself. The CNAS report states that “Europe's dependence on energy imports from Russia, mainly oil and natural gas, has allowed Moscow to continue to fund its military operation in Ukraine. At the same time, Russia may be increasingly willing to use its energy leverage on Europe as a weapon, as it has begun to do with Poland and Bulgaria, increasing the need for the urgent development of alternative energy sources.
– What they wanted – began to reduce the supply of energy. The report states that “at the end of April, Gazprom suspended gas exports to Poland and Bulgaria due to their refusal to pay for deliveries in rubles. However, Warsaw said there were “options to get gas from other partners” and that Poland “made some decisions many years ago to prepare for such a situation”, indicating the country's confidence in its economic resilience to seek alternatives to Russian gas. Although Sofia has also announced a search for alternative energy sources, Bulgaria currently relies on Gazprom for more than 90% of its gas supplies. This has caused concern throughout the EU, especially in Central Europe, where countries like the Czech Republic are almost entirely dependent on Russian gas for energy.”
They themselves admit that anti-Russian sanctions have plunged Europe into an energy crisis.
“Moscow’s retaliation may indicate that Russia sees further sanctions in the energy sector as inevitable and seeks to maximize damage in Europe by cutting off supplies before Europe is ready to switch to alternatives,” they are outraged speakers.
– Yes, almost everything. Thus, Bloomberg reports that due to a decrease in gas supplies from Russia and rising energy prices in Germany, gas bills could triple. Companies are preparing to reduce or stop production altogether.
Risks are not limited to recession, cold weather in the coming winter and plant shutdowns. Germany prospered for decades thanks to cheap gas from Russia. The answer to the needs of the growing economy was most often a new pipeline to Russia.
This era is over, and companies from BASF to Volkswagen are forced to come to terms with the new reality.
Undoubtedly, Germany has a solution to the problem – for example, restart coal-fired power plants and switch from one type of fuel to another in various industrial processes.
“The transition to affordable renewable energy will take many years. Metals, paper and even food companies may have to reduce or even shut down production facilities in Germany. It will take 115 days to meet the government's target of 90% gas storage capacity by November, according to the new calculations. But for this it is necessary that the pace of supplies be maintained at the current level, and this is extremely unlikely. Facing a very bleak outlook, June 23.
Germany, which still gets a third of its gas from Russia, has raised its emergency gas plan to the second of three. If the shortage widens, the German authorities may resort to rationing supplies.
Uniper, Germany's largest importer of Russian gas, has already warned that it could face difficulties in fulfilling contracts with local utilities and producers if Moscow will continue to restrict supplies.
This crisis spread far beyond Germany. It has already affected 12 EU member states, and 10 countries have issued early warnings as part of legislation on the security of gas supplies. Europe's rising demand for liquefied natural gas will also hurt poorer countries around the world as they now have to compete more for supplies.
U.S. sanctions allies admit they hit European countries themselves the hardest than in Russia. This was confirmed by Russian President Vladimir Putin during the opening of the Economic Forum in St. Petersburg.
He named a devastating figure: the direct losses and damage suffered by the EU countries as a result of the imposition of sanctions against Russia reached $400 billion.
– The Anglo-Saxons, as always, double-dealed and framed their allies. Let me remind you that on March 8, President Biden signed an executive order banning the import of Russian oil, liquefied natural gas and coal into the United States and prohibiting US participation in financing the Russian energy industry. US imports account for less than 10 percent of all Russian exports.
Some US allies have also banned imports or taken steps to eventually ban Russian energy. Shortly before Washington, the UK announced it would be phasing out Russian oil imports by the end of the year, and Canada announced a total ban on its admittedly minor Russian energy imports.
They could afford to take these symbolic steps, none of these countries is a major importer of Russian oil. Canada imports between 0 and 3 percent of its petroleum products from Russia each year, and Russian imports account for about 8 percent of total UK oil demand.
Australia has also announced plans to phase out imports. But in Europe the picture is quite different. It is noteworthy that no European country joined these actions. President Biden put on a good face on a bad game and pointed out bluntly that the United States did not expect all allies to join the ban on Russian imports. Like, your support was not really needed.
And yet, many European refineries are avoiding new purchases of Russian oil. To reduce the impact on European and global energy markets, roughly two weeks later, the Biden administration announced, in coordination with its allies and partners, the release of almost 180 million barrels of oil from the world's oil reserves.
– And how! The authors of the report report that “The American Automobile Association noted the biggest short-term spike in gasoline prices, with domestic gas stations charging an average of 26 cents more per gallon in just one week, and the average price of regular gasoline in the United States reached $4.17. breaking the previous US record of $4.11 per gallon in July 2008. The national average price topped $5 a gallon for the first time in June.
In the European Union, daily imports of Russian natural gas rose from about $210 million to $690 million from January to March 2022.
And, most embarrassingly for the United States, the main buyers of oil in Asia, China and India, began to buy Russian oil in quantities that the West previously bought from Russia, before the imposition of sanctions, and oil prices rose to such an extent that Russia began to receive even more income than she received about four months ago.
As the New York Times noted, Russia's imports from China after the introduction of anti-Russian sanctions increased by more than a quarter, and this largely compensated for the lack of imports from European countries, and at the same time, India significantly increased its purchases of Russian oil.
– Not too comforting. They have to state that “currently, energy exports from Russia generate an inflow of hard currency. As a result of high commodity prices and a collapse in imports, Russia's current account will hit an all-time high of $250 billion in 2022.
In a little over a year, Russia will be able to recover its $300 billion of frozen reserves, despite coordinated G-7 sanctions on the Russian Central Bank.” The question is, was it worth fencing the garden?
– Here the main blow is applied to the ruble in order to devalue it. But here, too, it's a bummer. American analysts grittedly admit that “the Russian government has taken several defensive measures to mitigate the economic damage from sanctions. After the first tranches of sanctions, the Russian ruble quickly fell by more than 30 percent… However, the ruble has since regained much of its original value thanks to tight Russian capital controls and the continued inflow of oil and gas export revenues from countries that are still were largely unsanctioned.”
Russia's defensive economic measures, US analysts further explain, include doubling its interest rate to 20 percent and shutting down its stock market. Although the ruble has largely recovered from its initial collapse in the early days of the conflict, the recovery in the Russian stock market remains fragile, with the Moex stock index up less than 10 percent after a sharp 40 percent collapse in late February.
“Stabilizing the ruble is also costly,” the authors of the report continue. – To improve its ability to conduct monetary policy, Russia has required private firms and exporters to sell 80% of its export earnings to the Russian ruble market and plans to use its gold reserves for purchases, although these plans are likely to be hampered by recent US moves to it is to prevent Russia from using its gold reserves abroad to evade economic sanctions.” The authors of the report express hope that Russia is moving towards default.
– Theoretically, yes. But with practice, everything is more difficult. So, in May, Switzerland for the first time after the start of a special operation in Ukraine again bought a batch of gold from Russia. Recall that the purchase of this precious metal from Russia was also banned by the London Association of Markets immediately after the outbreak of hostilities.
The volume of imported gold, according to the Swiss news platform Suisse Info, amounted to about three tons. The site emphasized that “Switzerland's import of Russian gold, which took place for the first time since February, that is, after the outbreak of hostilities in Ukraine, showed that the gold producers could not bear the ban on the purchase of even a limited share of raw materials for their enterprises.”
At the same time, according to the site, the import of a consignment of gold into the country from Russia was also confirmed by the Swiss Federal Customs Service. What kind of default is there?
– It is they who are trying to portray supposedly humanism in this way. Like, they strive to do everything so that “not a single rabbit was hurt during the filming.” And at the same time, they themselves admit the futility of their efforts.
“While the allies continue to tighten sanctions, they will need to address the impact of sanctions and armed conflict on food security and other humanitarian issues both in Russia and around the world. In an attempt to impose “smart sanctions” targeting the Russian leadership but not the Russian population, the US Treasury Department has issued guidance documents and several general licenses that allow continued operations with Russia related to food, fertilizer, medicines and other humanitarian supplies.
Companies, however, face significant logistical challenges when moving products to and from Russia or Ukraine, including through the critical shipping lanes in the Black Sea. Aggressive risk reduction by Western financial institutions could make legitimate humanitarian operations almost impossible.
However, the smart sanctions strategy may have reached its limit. The full scale of numerous rounds of coordinated sanctions has led to commercial consequences that go far beyond the scope of legitimate sanctions, and some companies have even completely voluntarily left the Russian market,” American experts write in their impotence.
In general, tense energy markets are getting tighter, food shortages are exacerbating food insecurity in developing countries, globalized trade is shrinking and inflation is rising.
And what have they achieved? “It remains fundamentally unclear whether the sanctions have significantly changed the calculations of Russian President Vladimir Putin,” the authors of the report are surprised, acknowledging that the threat of sanctions has not stopped Russia’s actions in Ukraine.
However, the phrase “smart sanctions” is like “ smart West” in itself does not sound that funny, but clearly inappropriate. Other American leaders and politicians confused Austria with Australia, the Czech Republic with Chechnya, threatened Belarus with an invasion of their aircraft carrier fleet …
– Yes, these sanctions have entered the fourth wave. The United States targeted 33 entities and individuals allegedly involved in Russian information operations in Ukraine. These actions were later intensified on May 8 when the US government imposed further sanctions on three major Russian state-owned television companies that were the largest recipients of foreign advertising revenue. These revenues, in their opinion, can help finance Russia's special operation in Ukraine. The EU and the UK have also imposed their own sanctions on two Russian state broadcasters, RT and Sputnik, effectively banning ISPs from allowing these media to be viewed on their services. An act in the style of Ostap Bender, who threw chess pieces in the face of a tournament participant for a completely fair remark: “Comrade grandmaster, the knight doesn’t move like that.”
In the meantime, we can state that Russia’s economic development indicators have not only not decreased , but even increased after the imposition of sanctions against it, and the goal of Western states – to destroy the Russian economy through sanctions – still remains just as distant.