Elijah J. Magnier
“We cannot replace Russian gas overnight,” Germany announced, followed by France to confirm that “its stockpile of gas will not be enough if Russia stops supplying us.” Hungary did not hesitate to reveal that “its economy and local currency will collapse if energy-related sanctions are imposed on Russia.” Finland confirmed that it needs eight years to dispense with Russian gas, of which Europe imports 43% of its annual needs through the “Northern Stream I” and the “Yamal” lines. Indeed, the Russian gas flows at its total capacity and crosses Byelorussia, Poland, and Ukraine, still enjoying Russian gas despite the ongoing war.
It is not rocket science to understand why Europe has taken successive steps to impose sanctions on its leading Russian economic partner in the energy field. But most affected by their own sanctions are the European states, especially after gas prices reached four times their original price ($4000 per thousand cubic meters) and oil prices skyrocketed to $139, dropping at a later stage to 131$. America, the largest importer of Russian oil, is significantly affected by its sanctions on Russia, like Europe and the rest of the world. However, the US has decided to apply the sanction to the Russian oil and all oil products it imports, fully aware that the energy price will become unaffordable for large numbers of the world population. It may reach beyond $200 a barrel, a price that would affect the cost of living all over the planet. President Biden recognised publicly that the war in Ukraine would involve “all of us”.
Unsurprisingly, the US is the primary driver of sanctions because it is the one fighting the war through Ukraine and supplying it with arms since before and during the war. The US pushed its Western allies to follow suit to impose collective sanctions on Russia that in the first place harmed the US’s allies. Since 2014 and until today, the US sanctions on Russia reached the figure of 5532, which includes companies, institutions and individuals- without necessarily damaging the Russian’s capabilities or altering its plans.
However, several countries like China, India, Iran, Pakistan and other African and Asian states have rejected the US dictate and did not join the collective anti-Russia campaign. This was expressed by Pakistan’s Prime Minister Imran Khan when he received a letter from the head of Western diplomatic missions asking him to condemn Russia in its war on Ukraine. He replied, “Do you think we are your slaves and that we will do whatever you ask?”
To date, the US and Europe have primarily contributed to financing the Russian war on Ukraine because they pay 14 billion dollars a month for Russian oil and gas. America knocked on Venezuelan doors after a boycott of many years and its illegal “recognition » of Juan Guaido as president-in-exile instead of the officially elected President Nicolas Maduro. The Venezuelan President received a US envoy requesting the return of oil production to its total capacity to supply to the US and repair its six refineries that Washington sanctioned (its spare parts) for decades. Iran restored a refinery and brought it back into operation for internal use, enabling Venezuela to export a little of its oil surplus.
However, Venezuela is hesitant to follow the US’s wish and imposes its conditions. The most important requests are lifting all sanctions, recognising Venezuelan sovereignty, and returning the relationship to normal before any other steps. This certainly does not mean at all that Caracas will save the US and compensate its needs for oil and turn its back on Russia, with whom it has deep and long-term economic and security agreements.
The US went to Iran to speed up the nuclear agreement. Still, we were confronted with the Russian wall, requesting written consent to continue military-economic cooperation between Moscow and Tehran. This indicates Iran’s response to Russia by not allowing the US to depend on Iranian oil instead of Russian. Would Venezuela and Iran give a lifeline to the US administration, which has imposed sanctions on the two peoples for many years, whereas Russia helped them with its capabilities?
The price of oil in March of 2020 was about $16 per barrel. It has hit the $140 wall in recent days, and in the coming days, the price is expected to increase following the US oil sanctions. Moscow will compensate the US sanctions on oil imports by increasing the oil price worldwide. The US oil sanctions will certainly not stop the war in Ukraine, contrary to the effect of an agreement of neutrality between Kyiv and Moscow.
Iran and Venezuela will certainly not sell their surplus and reserves of oil to lower their price and help the US with its objectives when they can sell very little oil at a very high price and embarrass Biden while standing by Russia. Business and politics do not always meet, but time will tell how the US can bring back the oil price to its average level.
As for other Western sanctions, there are several problems whose consequences the West may not be prepared for when rushing towards an economic war against Russia. The Nickel price observed its highest single-day increase of around 60% because of the market’s worries about the supply shortage from Russia, the world’s third-largest nickel producer of a metal used in technologies and batteries. The steel price followed as concerns in Europe of the longevity of the war in Ukraine arose.
Moreover, the Russian civil aircraft sector will be hit but has some benefits up its sleeve. Hundreds of planes leased by Russia from the West will not return to their owners anytime soon because of the sanctions and European and Russian airspace closure. Russia says that its planes will continue to operate within the Russian continent and to the countries of Asia and Africa. Russia said it has the right to pay the lease in Russian local currency (ruble), or these planes will be considered compensation for the loss that will hit the national Aeroflot Company. Before the sanctions, Aeroflot’s annual profits reached about 491 billion dollars. As of today, the 8th of March, all flights from Moscow to Europe and vice versa have been cancelled. The European companies that own the planes will not recover their assets due to sanctions and Russia’s intention to hold them in Russia.
The central bank of Russia will begin to rely on its internal financial messaging system (FMS) of the SPSF system as an alternative channel for US international electronic financial messages (SWIFT). Only a few Russian banks were subjected to sanctions and were prevented from using the SWIFT system because the West needs this system to pay billions of euros in advance for the price of oil and gas.
PAYPAL, VISA, AMERICAN EXPRESS and MASTER CARD have suspended financial operations with Russia. Moscow preferred the Chinese UNION PAY system as an alternative that operates in 180 countries worldwide. Credit cards using another system called MIR will be used for local transactions.
Undoubtedly, there is mass emigration of US and European companies from Russia, which will harm both Russia and the West. However, there is no doubt that the sanctions against Russia are also harsh on the west. If Russia weaponises its energy, it will materialise Hiroshima-like consequences in which the prices of fuel and gas will rise to a level never before seen in past crises.
However, Moscow is prepared for the economic war. Russia has cash reserves amounting to 632 billion dollars in euro (32.3 per cent), yuan (13.1 per cent), gold (21.7 per cent) and dollar (16.4%). 450 billion dollars are in Russia and China and other amounts in France, Greece, Germany, the US and the UK.
The consequences of the Russian war on Ukraine are undoubtedly a pivotal stage that represents a significant turning point in history. Russia will turn towards its first ally, China, which has the most critical monetary and developmental reserves globally. It will also resort to Pakistan, India, China, and Iran for trade and industrial exchange and other Central Asian countries to continue economic and commercial exchanges.
Russia bypassed the sanctions and the devaluation of the currency in 1998. It was not affected by the European and American crisis in 2008, and it has born the economic earthquakes whose repercussions are heard today in the West in particular. However, the heavy sanctions will not be without severe consequences, and the unprecedented anti-Russia media campaign has reached its highest level. It will affect the morale of the Russian population.
The West shot Russia and hit its own feet: European officials wish to see the end of the war in Ukraine soon. However, the whole world fears this war with its economic and military repercussions and hopes that it will end finally on the borders of Ukraine. However, President Putin has determined to savage Ukraine into submission, regardless of the consequences. The Russian President is not expected to pull back unless Ukraine first signs the required agreement. Official international talks with the West must include Moscow’s fear of NATO’s expansion and clarification of its future intentions toward Russia.
INTERNATIONALIST 360° 