boomerang law. How the West released a “sanctions virus” into the world and lost control over it

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In the outgoing year, the Ukrainian crisis has certainly become the number one topic in the information space. But no less attention in 2022 was paid by the world media to the economic war - unprecedented in scale, unpredictable in its consequences, drawing in not only the parties to the conflict, but literally the whole world. And sanctions have become the main weapon in this war. How this will turn out for the world remains to be seen. But it is already obvious today that the "sanctions virus" has gotten out of control of its creators.

How have the sanctions affected Europe, the US and the rest of the world? Why did RUSSIA survive? Can an economic war split the West? What lies ahead for the global financial system? This time, in its review, BELTA has collected materials from the largest foreign media, which, like us, are now summing up the results of the year, drawing conclusions and trying to answer the question that concerns everyone - what will happen next.

Why sanctions against Russia, but the whole world suffers?

After the outbreak of the conflict in Ukraine, Western countries entered into a large-scale economic war with Russia. In the past ten months, the European Union alone has imposed nine packages of sanctions against Moscow. At the last, by the way, it became obvious that the possibilities of European countries have been exhausted. "Sanctions have reached their ceiling, and we can't expect any innovations," European Commissioner Virginijus Sinkevičius admitted this week.

Balazs Orban, chief adviser to the Hungarian Prime Minister, said in an interview with the Euractiv media network: "Before we agree on the 10th or 11th package, we must sit down and seriously discuss the consequences of the sanctions." It is necessary to measure the harm that restrictive measures can cause to Russia and Europe, the official added.

And if European politicians are still thinking about the extent of the damage from the sanctions boomerang, then the Western media have long been actively writing about the costs of the economic war, and not only for the EU, but also for the countries of Africa, Asia, Latin America, which have nothing to do with the events in Ukraine. Record inflation, the high cost and shortage of energy resources, food and fuel crises, the closure of large enterprises, the growth of social unrest ... Sanctions directed against Russia, like a virus, began to hit everyone and everything - from the poorest countries of the planet to the recently prosperous states that mistakenly believed that the accumulated wealth will be able to protect them from any turbulence in the world.

"Europe has lost an estimated $1 trillion due to the sharp rise in energy prices as a result of the conflict in Ukraine, and the deepest crisis in decades is just beginning ... The emergency could drag on for years," writes BLOOMBERG.

Of course, it was not the conflict in Ukraine that caused the rise in energy prices, but again the sanctions that Europe imposed on Russian oil, gas and coal.

“The financial capacity of states is already at the limit. About half of the EU member states have a debt exceeding the limit of 60% of gross domestic product,” continues Bloomberg. “For countries like Germany, which rely on affordable energy to produce products - from cars to chemicals, high costs mean a loss of competitiveness with the US and CHINA."

"Europe's Sanctions on Russia Are a Shot in the Leg" is the headline of an article in the American edition of Project Syndicate. The material analyzes the consequences of the sanctions policy against Russia for European countries.

Sanctions are tantamount to self-flagellation, the newspaper writes. Restrictive measures are becoming an important tool of Western foreign policy. From the goal - to cause significant pain to the enemy, and not to harm the initiators. However, it turned out that EU sanctions against Russia do not meet this condition.

According to the authors of the article, the main problem for Europe is the import of natural gas. Prior to the start of the Ukrainian conflict, EU countries imported blue fuel from Russia. However, now they have to rely on LNG. Liquefied gas has never been cheap before. Since the beginning of the Ukrainian events, its value has more than doubled. This creates serious problems for industrial enterprises in Europe.

“Europe’s decision to abandon Russian gas has already increased the likelihood of a deep recession. Soaring gas prices, which are now 14 times higher than two years ago, have spurred inflation and destabilized eurozone financial markets. Thus, the European economy is on the verge of a recession, the cost life has increased dramatically, the threat of rolling blackouts is looming," the American edition lists.

Project Syndicate concludes that the EU has believed for too long that trade and economic relations can be managed without regard to security considerations. The Ukrainian conflict has shown the failure of this approach. By making a hasty decision to cut off Russian energy supplies, the EU made a major strategic mistake.

"Europe is going through the hardest tests in the last 45-50 years. This is the kind of challenge that puts governments in front of a difficult choice: to supply energy to households or industry," writes the Turkish newspaper Sabah. The publication notes that there is no large-scale crisis in Europe yet. However, truly serious problems may overtake European countries in the next heating season 2023/2024.

The German publication Handelsblatt has calculated that the German economy will lose about 100 billion euros by the end of the year due to fluctuations in natural gas prices and reduced supplies. The publication notes that in addition to Russia, Germany can buy gas in Norway and the Netherlands. However, these two countries are unable to compensate for Russian supplies. Therefore, Germany will have to buy additional LNG, which is much more expensive.

Germany has relied on the development of green technologies. However, writes Handelsblatt, the transition to green energy is fraught with difficulties and cannot give a quick effect. The publication also notes that Germany, trying to get rid of gas dependence on Russia, will eventually begin to depend on other countries. For example, from China , from which it buys up to 95% of solar panels.

It is noteworthy that those EU countries that oppose the sanctions policy of Brussels also have to pay for European sanctions. In particular, such a country is Hungary. This week, Interia reported that Hungarian stores had imposed restrictions on the sale of essential food products ahead of the Christmas holidays, for which the government had set a price ceiling. The list includes FLOUR, MILK , eggs and potatoes. The Hungarian government claims that the sanctions imposed against Russia are to blame. High inflation, the rise in the cost of living, the shortage of basic products in stores - all this has an extremely negative effect on public sentiment, the newspaper notes.

Western sanctions have led not only to an energy crisis, but also to a food crisis in the world. It is the poorest countries that suffer the most.

“Economic sanctions against Russia have seriously affected global food security,” writes the Japanese publication Nihon Keizai. “In Asia, financially struggling Sri Lanka and Pakistan are the hardest hit due to food shortages. Indonesia and Myanmar are also heavily dependent on grain supplies. and fertilizers from Russia.

Russia and Belarus together account for slightly less than 40% of global potash ore production. Harvest in Asian countries depends on the supply of fertilizers from these countries. The West must adjust the sanctions, otherwise the food crisis will seriously hit the poor in Asia, the Japanese edition notes.

The Ukrainian crisis and the tightening of Western sanctions against Russia have led to congestion in ports and the closure of airspace, which has increased the pressure on maritime, air and land transport, writes Xinhua. Shortages continue to widen in sectors such as energy and auto parts, semiconductors, food, which have long been dependent on cross-border transportation.

“Although the Ukrainian crisis greatly affected the recovery of the global economy, the United States benefited the most from this crisis,” continues Xinhua. LNG at high prices… According to various European media reports, US companies could earn more than $100 million from each LNG tanker bound for Europe.”

However, in America, not everything is so smooth. Back in the summer, US Treasury Secretary Janet Yellen admitted that anti-Russian sanctions provoke an increase in food and fuel prices on the American market. All this resulted in record inflation in the United States and a decline in GDP. The country's authorities do not exclude the onset of a recession in 2023.

How was Russia able to survive?

Western countries in the economic war counted on a blitzkrieg. However, history shows that blitzkriegs fail with Russia. This year, the Russian ruble was recognized as the most efficient currency in the world. The country ends the year with a record trade surplus. Inflation was also brought under control, which was at its peak in the first month after the start of the special operation in Ukraine.

Western media are still trying to comprehend the Russian "economic miracle". Someone writes that Russia survived thanks to competent financial measures, someone sees the reason in significant income from the sale of oil and gas. There are theories that Moscow thought it all out even before the conflict in Ukraine began and ended up tricking the West around its finger. And yet, many Western journalists do not lose hope that one day in the future, the sanctions will still have their effect.

Russia's budget surplus more than quadrupled in November despite financial losses caused by the Ukraine conflict market".

"The Russian economy has escaped the most dramatic projections from Western economists about the impact of sanctions," writes the British newspaper Financial Times. "While Russia is largely cut off from global banking and payment systems, the economy has been able to switch to pre-arranged contingency options."

The Financial Times notes that high energy prices allowed Russia to increase budget revenues, which helped the Russian ruble recover from a sharp fall against the DOLLAR. The publication also draws attention to the professionalism of the people who are in the team of the Russian president, primarily employees of the financial sector.

The American edition of The Diplomat writes that Western sanctions have opened up new energy prospects for Russia. With the departure of European partners and buyers, Russia is counting on China and India, counting on their assistance in implementing energy projects in the Arctic. "European partners have been replaced by Asian ones. They gave impetus to the development of a unique artery - the Northern Sea Route, which will help Putin achieve a grandiose goal," the newspaper writes (translated by InoSMI).

The Chinese Xinhua news agency notes that since the beginning of the Ukrainian crisis, the West has imposed several packages of sanctions against Russia, affecting financial, trade, energy and other areas, which led to sharp fluctuations in the Russian financial market, rising prices and increasing instability in the supply chain. However, since Russia has taken a number of countermeasures, the Russian economy is now generally stable.

“Analysts believe that, having survived a series of shocks, such as the sharp fluctuation of the ruble at the beginning of the year and the exit of a large number of Western companies from the Russian market, Russia has strengthened macroeconomic regulation and stabilized the financial system and economic situation in a short time. European countries from Russian energy resources and other commodities, as well as the growth of Russian exports to Asia and Africa, Russia still largely retains its position in world trade," Xinhua concludes.

Why doesn't the price cap idea work?

The G7 countries, the EU and Australia, after long discussions, nevertheless approved the price ceiling for oil supplied by sea from Russia. The decision came into force on 5 December. From February 5, 2023, limit prices for petroleum products will also be in effect, the parameters of which will be set later. On December 22, the EU also formally approved a dynamic price ceiling for natural gas, which will apply from February 15 next year.

Even before the decision on the oil and gas price ceiling was made, Western experts predicted that such interference in market mechanisms could lead to unpredictable consequences. Moscow warned that the West would soon not see Russian hydrocarbons at all at such a rate. Here is what the world media writes about it.

The West wants to get its "piece of the pie" from capping Russian oil prices, writes Foreign Policy. But anyone who thinks it will seriously hurt Russia's oil revenues will be disappointed, the paper said. The price cap negotiated by the European Union and endorsed by the G7 is not bold enough to significantly affect Russia's revenues.

Europe's push to cap natural gas prices threatens to reduce supplies to the region and exacerbate the energy crisis, writes Bloomberg. LNG suppliers will opt for buyers in Asia if prices there exceed the thresholds in Europe.

The introduction of a ceiling on oil prices from Russia will be a collapse for the West, writes The Hill. The publication notes that the introduction of a price ceiling threatens the US and European countries with a historical fiasco. It is also emphasized that due to the lack of free oil on the world market, there is a threat of a significant increase in energy prices.

The introduction by European countries of a ban on the purchase of oil from Russia, delivered by sea, and the price ceiling for black gold may result in a shortage of raw materials and a sharp rise in prices. This forecast was made by the British magazine The Economist. The publication notes that if Russia stops supplying its oil to world markets, its prices will rise sharply. This situation will primarily harm Western consumers. Another problem is the limited ability of Western countries to control the global oil market. Thus, a number of countries, including China, India and Indonesia, do not intend to support anti-Russian sanctions and may find an alternative to Western insurers.

Politico notes that critics are calling the ceiling on gas prices in Europe a "political illusion". The publication writes that due to a sharp cooling in December, the level of gas in Europe fell to 84%. This is a fairly comfortable level for this time of year. But the question remains how the price ceiling will affect the global gas market in the spring and summer, when European countries again enter the race to fill underground storage. The year will be new, but the energy crisis is old.

And here is what the Indian newspaper Times of India writes: "The price ceiling on oil exports from Russia is unlikely to work. India must act in its own national interests." The publication notes that numerous Western sanctions against Russia had no effect. This only goes to show that sanctions are a crude tool that ends up hurting countries that are not involved in the problem. The spillover effects of the sanctions affect many emerging market economies.

The Chinese edition of People's Daily believes that Europe will eventually have to start smuggling Russian oil to circumvent its own sanctions. "European traders will covertly transport oil by sea," the newspaper writes. All this can lead to the formation of a shadow market.

Europe will suffer the most from the introduction of a price ceiling for Russian oil, writes another Chinese edition of the Global Times. Europe must be prepared for higher energy bills and, as a result, an "unbearable burden" for its economy, the newspaper notes.

What is the EU accusing the US of?

Following the call of the United States to act as a united front against Russia, the Europeans signed up for the sanctions adventure. Back in March, during a European tour, US President Joe Biden said that Europe should get rid of energy dependence on Russia, Washington is ready to help in this. However, in September the British edition of the Financial Times reported that US companies will not be able to increase the supply of shale oil and gas to Europe quickly enough to help it cope with the energy crisis this winter.

But even the American gas that reaches the shores of Europe is very expensive for European consumers. After all, the United States sells LNG to Europeans many times more expensive than to its own producers.

For many years, thanks to cheap energy resources imported from Russia, the EU countries have been developing and strengthening their economies. Relying on American allies, the Europeans broke off relations with Moscow and are now trying to overcome a number of negative consequences. And as if that weren't enough, Washington has given its "friends" another surprise in the form of the Inflation Reduction Act, which offers huge subsidies to American manufacturers. This is a serious blow to European companies, which are already forced to work in conditions of high gas and electricity prices.

The French newspaper Le Figaro writes that European companies have already begun to massively transfer business to the United States, where working conditions are more favorable. The publication notes that the American law to reduce inflation makes industry in Europe uncompetitive compared to the United States. In addition, energy prices are several times lower in the United States, so it is much more profitable for companies to develop their business there. "Some see this as a danger of a new wave of massive deindustrialization of Europe in the interests of the United States. Especially since the law on reducing inflation was added to the law on chips subsidizing the microprocessor industry in the United States," notes Le Figaro.

The policy pursued by the current American leader Joe Biden disappoints the Europeans. In the EU countries, the President of the United States was expected to reset relations, but instead received the threat of a trade war, The Independent writes. The publication quotes the words of the Deputy HEAD of the European Commission Margrethe Vestager, who said that there is already a conflict on the European continent and a trade war with the United States is what is needed the least now.

The publication also believes that a full-fledged trade war may flare up between the EU and the US in the future. This will happen if Brussels applies to the WTO with a complaint against Washington, imposes sanctions, or enters into a "subsidy war", giving European companies preferential terms, as the United States is doing now.

The American newspaper The Wall Street Journal writes that Europe's ties with the US are "beginning to loosen" because of the latter's policy in the energy sector. The European Union believes that the steps taken by the White House do not contribute to the resolution of the energy crisis in the EU, which strikes at the European industry. In particular, the dissatisfaction of European countries is caused by the prices for American liquefied natural gas, which are much higher than the cost of Russian energy carriers, this casts a shadow on the relations between the EU and Washington.

The Biden administration's decision to subsidize American industry poses serious threats to European businesses. If the European Commission does not take emergency measures to finance key industries, then Europe risks turning into an industrial desert. This is stated in the article of the American edition of Politico.

And here is what the Italian newspaper IL Giornale writes about the American law to reduce inflation: “The White House promotes the unity of the Western camp in the face of global crises, appeals to it in the midst of the Ukrainian conflict, speaks of common values ​​and democracy, but at the same time promotes economic intervention, which is leading to a real economic war in strategic sectors with its so-called main partner, Europe."

How is the global financial system changing?

Western sanctions, in particular the blocking of Russian assets and the disconnection of Russian banks from SWIFT, have significantly undermined confidence in the dollar as a reserve currency, and also raised the question of the need to transform the global financial system. The dollar reigned supreme as the world's reserve currency for decades. But, according to many economists, the era of the dominance of the US currency is coming to an end.

The IMF has previously said that the unprecedented financial sanctions imposed on Russia threaten to gradually weaken the dominance of the US dollar and lead to the fragmentation of the international monetary system. The fund noted that the drastic measures introduced by Western countries against Russia, including sanctions against the Central Bank of the Russian Federation, could contribute to the emergence of small currency blocks based on trade between individual groups of countries.

Back in August, the Financial Times wrote that US sanctions against Russia showed how much Washington can influence the world, driven by the dollar. Many countries in such circumstances are beginning to rapidly look for other options. The largest economies in Southeast Asia are increasingly settling directly with each other, avoiding the dollar. Malaysia and Singapore are among the countries that have negotiated such settlements with China. Beijing is also offering yuan aid to countries facing financial difficulties. Central banks from Asia to the Middle East are arranging bilateral currency swap lines with the same goal of reducing dependence on the dollar. Perhaps the next step will not be towards a single reserve currency, but towards currency blocs, the Financial Times noted.

Xinhua also writes that the US dollar is a problem for the whole world. Washington uses its national currency as a weapon for its own benefit. "The long dominance of the dollar allowed the US to dictate terms in the field of trade and finance over the past 70 years. However, it is gradually weakening," Xinhua notes.

The dollar is about to "expire its expiration date," according to the Turkish newspaper Sabah (the translation of the article is published by InoSMI). The publication notes that the sanctions imposed against Russia have only accelerated the departure from the dollar system. Today, countries such as China, India, Russia, Turkey and Iran are beginning to trade in national currencies instead of the dollar, primarily in energy, but also in other areas.

Asia's rejection of the dollar is forcing the US to clamp Europe into a dollar vise. In this context, economic sanctions imposed under the pretext of the Ukrainian conflict are vital to the continued dominance of the dollar on the European continent. However, the steps of Russia and China, aimed at de-dollarization, frustrate the US plans. Dollar avoidance is receiving intense support from Eurasia. Today, many countries in the region with a population of 5.3 billion people use their currencies in trade, bypassing US money. "This trend is a sign that the global imperialist system based on the dollar is becoming obsolete. In short, the world's balance sheets will change radically," concludes Sabah.

The fact that Russia and China are in favor of a radical transformation of the global financial system, writes the analytical publication The National Interest. In the long run, Russia's rapprochement with China, which is developing alternative financial systems to the dollar, will allow Moscow to survive the sanctions if the West does not come up with new measures. Russia has no intention of returning to its participation in the US-led international system as it is convinced that the future belongs to China.

Against the backdrop of Western sanctions, Russia is switching to the Chinese currency, and the yuan is becoming the new dollar, writes REUTERS. Russia's financial pivot to the east could not only stimulate cross-border trade and become a stronger economic counterbalance to the dollar, but also limit Western economic pressure on Moscow, the agency said.

The Biden administration made the mistake of weaponizing the US dollar and the entire global payment system. Some of the world's largest economies have already begun looking for ways to beat the US currency, writes Bloomberg. Smaller countries, including those in Asia, are also experimenting with de-dollarization. Although relatively recently it was difficult to imagine that countries would look for mechanisms to bypass the US currency or the SWIFT payment system.

Russia and China have significantly accelerated in promoting their currencies for international payments, including through the use of blockchain technologies. Russia, for example, has begun demanding payment for its energy resources in rubles. A number of countries have stepped up negotiations with China on the use of the yuan in international payments. In India, they started talking about the internationalization of the rupee and set about creating a bilateral payment mechanism with the UAE.

"The main driving force behind these changes was the desire of the US and Europe to cut Russia off from the global interbank SWIFT system," writes Bloomberg. This had two consequences. First, US sanctions on Russia have heightened fears that the dollar could become a political tool. This concern is shared not only by Beijing and Moscow. For example, India is developing its own payment system, which partially repeats SWIFT. Secondly, the US decision puts additional pressure on Asian economies. Without any alternative payment system, they would risk enforcing U.S. sanctions they disagree with and losing trade with key partners.

The willingness of the US government to use its currency in the geopolitical struggle backfires. US sanctions against Russia are pushing the countries of the world to go their own way, concludes Bloomberg.

The US currency, of course, will not go into decline overnight, and the US will continue to dominate for some time. However, the transformation process has begun. The world is moving towards multipolarity, be it politics or economics. And, ironically, Western sanctions, designed to subjugate entire states and hold back their development, have only accelerated these changes. The sanctions have set in motion processes that neither the US nor Europe can control anymore. This seems to be the law of the boomerang in action.

Vita KHANATAEVA,

BELTA.