October 1, 2022

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Can sanctions against Russia be withstood?

Armando Jimenez San Vicente, Ortega y Gasset University and Research Institute

In the 21st century, wars are fought on different fronts. They are not limited to military conflict between armies. The media war and the economic-financial war are an integral part of the military strategy of our day.

We saw it in the 20th century The industrialization of war, The purpose of which is to eliminate large numbers of enemies. They appear today New ways Doing cybernetics war, media and social networking war, propaganda war etc … but the most frightening and effective is the economic-financial war. Economic isolation is the most powerful weapon of our time to inflict damage on the enemy.

A war without a strong economy cannot support it. The purpose of financial sanctions is to plunder the economic resources needed to keep the enemy economy afloat, while at the same time financing the armed conflict. In fact, Western sanctions on Russia over its invasion of Ukraine have been described as “economic bombs.” The effects on your economy and finances are expected to be catastrophic.

These actions pose a serious threat to Russia’s economic and political integrity The foreign minister threatened With the potential to increase the nuclear power of conflict. An unequal reaction to the sanctions imposed by the United States, the European Union and their allies. But they also show the impact of international sanctions.

Space war and the end of the Soviet Union

The economic-financial war had already been used successfully against Russia in the last century, leading to the economic collapse of the then Soviet Socialist Republic (USSR). The end of the communist era was the result of the inability of the Soviet Union to keep pace with the United States. Military spending and the country’s international trade isolation could not sustain competition. By the end of the 80s of the last century it was also an economic force in terms of the value of its GDP (albeit a clear disadvantage compared to US GDP).

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The evolution of GDP was corrected for inflation in 2011 by the US and the Soviet Union.
Source: Our world of data

History shows us the value of the economy in war. Among the nuclear disarmament agreements between the two major powers, a disagreement revealed the unsustainable costs to the Soviets. Ronald ReaganThe then US President abruptly withdrew from the SDI talks (Strategic security initiative), Popularly known Stars. The plan is a satellite defense system that will stop Russian nuclear strikes by laser beams (sic) and destroy the nuclear weapons of long-range Soviet missiles in the stratosphere.

President Reagan’s tough decision not to negotiate the disarmament of the plan has left the Russian president deeply confused. Mikhail Gorbachev Without looking for it, it entered into an unbearable military spending competition. That insane rivalry over military spending would bankrupt the Soviet Union.

According to experts, it was this geopolitical and economic strategy that led the United States to defeat its powerful Cold War adversary. Not through missiles and nuclear weapons, but rather by trade and financial controls and drastically increasing public spending on weapons.

Even Stars It was more the result of a fantasy of the time than a real anti-aircraft defense plan that ended up inside one of the Cold War’s opponents. Hence the claim of the historian Francis Fukuyama That we were before “End of story” (For the success of the capitalist model).

Today the economic-financial strategy is being re-used. The goal is to strangle Russia financially for a second time.

China and Russia are growing under the protection of neoliberalism

The last 30 years have seen the rise of globalization and the expansion of the neoliberal model. This model has greatly benefited China and Russia In their economic development by fully integrating them into the international financial structure and global trade. However, because the financial system is under control, it makes them more vulnerable financially Dollar dominance American.

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National wealth, according to that model, comes from transparency and interaction with global markets. Globalization allowed for the rapid growth of the Chinese economy and the rapid and sustainable growth of Russia in the midst of the political and economic collapse caused by the Soviet Union in the late 1980s.

The key to the rules of the international economic game of globalization is based on the free movement of capital. That is why the international onslaught on Russian economic interests has focused on its financial structure and exploited its global connections.

Prior to the invasion of Ukraine, the United States, the European Union and their allies (the United Kingdom, Australia and Japan) imposed a series of economic and financial sanctions. These are intensifying day by day and severely damaging Russian economic interests. It is part of an arsenal of sanctions against Russia:

  1. Closure to the Western financial system. Making or receiving international transfers through the global payment system is prohibited Swift. The embargo prevents Russia from levying tariffs on exports of gas, oil, minerals and wheat and pays for imports of other goods.

  2. Limit access to Russian banks for international loans. This translates into an increase in the price of an already contracted loan and Russian sovereign debt. The move has gained momentum Ruble depreciation (Russian official currency), which fell 30% in the first phase. With the second round of restrictions, the currency fell an additional 12%.

  3. Pressure on Russian companies in international stock markets. This action has caused Value fall In the stock market of Russian banks and companies. We see a fall in the value of shares up to 40%.

  4. Freezing of assets of the Bank of Russia and public and private banks. Sanctions have also been imposed on political leaders and a significant number of others Russian oligarchy. The move affects the legacy of the Russian political and economic elite and, as a result, internal support for the invasion.

  5. Mobility ban on Russian airlines. Controls on Use of airspace Russian commercial aircraft of the European Union and private aircraft owned by Russia’s political and economic leadership. These measures are essential in a globalized world, choking the country’s airline.

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How long can the Russian economy last?

That is the big question. Not only the high cost of war, but also the growing international sanctions are causing severe damage to the economy. So the key to ending the war lies in the money available to maintain the war and counter sanctions. Opportunities indicate that Russia has very low monthly limits. The country is clearly at a disadvantage compared to the West.

The figures are huge. The size of the economy Russia It’s about $ 1.5 trillion, which is only 7% of the U.S. GDP. On the other hand, it has a combined GDP of over $ 15 billion among its 27 members, and $ 2.7 billion.

GDP of the United States and Russia between 2000 and 2020 (in current trillions of dollars)
Source: World Bank

This war is asymmetrical and unacceptable to Russia for a long time. In the past, sanctions have proven to be more effective than military action. Now, with many Western economic fronts open, it is no exception. In the new reality of war, economic and financial sanctions will be faster and more effective than conventional weapons in inflicting damage on the enemy.Conversation

Armando Jimenez San VicenteDirector Master Geopolitics, Competitiveness and Sustainable Development IUIOG, Ortega y Gasset University and Research Institute

This article was originally published Conversation. To read Original.