Few things are certain, but the American government’s intent on inflicting economic hardship across the world is abundantly clear. There is no way Russia will take its sanctions lightly. They’ve already started fighting back with sanctions of their own. If this is part of the plan that US (pro-war) policy makers expect, it looks like a long and painful road ahead.
Per Reuters on Thursday, Russia announced:
…banning exports of certain goods and agricultural commodities. Exporting telecom, medical, auto, agricultural, electrical and tech equipment, as well as some forestry products, will be banned until the end of 2022.
Ripple effects will undoubtedly be felt across the world. No country could ever increase production to match Russia’s output; the time, cost and availability of resources cannot be replaced at home. No country benefits through trade limitations.
Then, there are international companies pulling out of Russia to prove a costly and still unclear point. But this too has consequence because Russia:
…approved the first step towards nationalising assets of foreign firms that leave the country in the wake of economic sanctions over Ukraine.
All sanctions matter; consider the case of fertilizer, which they’ll likely halt exporting:
Russia is a major producer of potash, phosphate and nitrogen containing fertilisers - major crop and soil nutrients. It produces more than 50 million tonnes a year of the fertilisers, 13% of the global total.
It’s only a matter of time before the world feels the ramifications of 13% of global fertilizer taken offline. Provided the American people and NATO allies are content with the possibility of food shortages so Russia can be “put in their place,” then it’s okay, but it’s a pretty big ask.
We should believe Putin when the BBC quoted him saying:
…there would be “negative consequences” for the world’s food markets due to the West’s sanctions because Russia is a major producer of agricultural fertilisers.
It helps to understand that:
The bulk of what western nations buy from Russia is made up of raw materials. Oil and gas, of course, but also metals like aluminium and nickel, not to mention potash and phosphates, widely used in fertilisers.
There are no winners in a trade war. All nations will be worse off regardless of outcome. Yet, in an almost Orwellian/anti-economic sense, a trade war ensures a self-inflicted race to the bottom, for everyone. The winner will be the nation who survives economic hardship the longest. In such, don’t bet against Russian perseverance. Breadlines, food shortages and currency collapse are not as foreign to them as they are to us.
And if economic sanctions and pulling companies out of Russia isn’t enough, in an attempt to inflict further pain, if not total war, US lawmakers want to introduce legislation to “freeze Russian gold reserves.” As explained in The Hill, the intent is to:
…make it more difficult for Moscow to avoid the pain from international sanctions…
This is in addition to freezing assets of billionaires as a tool to fight war!
If Russia fights back, the race to the bottom will be long, arduous and costly.
If not a shooting war, then the American people (and the rest of the world) will pay by living with less international trade. In the USA, the way of life has been changing for some time, with skyrocketing national debt, interest rates that may be hiked next week and inflation readings off the chart. But compared to the rest of the world, the American way of life is still relatively cheap, and luxurious, because the US dollar still has world reserve currency status.
