The American Foreign Affairs has published two interesting articles on the consequences of the massive economic sanctions on Russia.
The Toll of Economic War
How Sanctions on Russia Will Upend the Global Order
By Nicholas Mulder
The Russian-Ukrainian war of 2022 is not just a major geopolitical event but also a geoeconomic turning point. Western sanctions are the toughest measures ever imposed against a state of Russia’s size and power. In the space of less than three weeks, the United States and its allies have cut major Russian banks off from the global financial system; blocked the export of high-tech components in unison with Asian allies; seized the overseas assets of hundreds of wealthy oligarchs; revoked trade treaties with Moscow; banned Russian airlines from North Atlantic airspace: restricted Russian oil sales to the United States and United Kingdom; blocked all foreign investment in the Russian economy from their jurisdiction; and frozen $403 billion out of the $630 billion in foreign assets of the Central Bank of Russia. The overall effect has been unprecedented, and a few weeks ago would have seemed unimaginable even to most experts: in all but its most vital products, the world’s eleventh-largest economy has now been decoupled from twenty-first-century globalization.
How will these historic measures play out? Economic sanctions rarely succeed at achieving their goals. Western policymakers frequently assume that failures stem from weaknesses in sanctions design. Indeed, sanctions can be plagued by loopholes, lack of political will to implement them, or insufficient diplomatic agreement concerning enforcement. The implicit assumption is that stronger sanctions stand a better chance of succeeding.
Continue reading at www.foreignaffairs.com
The End of Globalization?
What Russia’s War in Ukraine Means for the World Economy
By Adam S. Posen
Over the last three weeks, the Russian economy has been overwhelmed by sanctions. Soon after the Kremlin invaded Ukraine, the West began seizing the assets of the wealthiest individuals close to Russian President Vladimir Putin, prohibited Russian flights in its airspace, and restricted the Russian economy’s access to imported technology. Most dramatically, the United States and its allies froze the reserve assets of Russia’s central bank and cut Russia out of not just the SWIFT financial payments system, but of the basic institutions of international finance, including all foreign banks and the International Monetary Fund. As a result of the West’s actions, the value of the ruble has crashed, shortages have cropped up throughout the Russian economy, and the government appears to be close to defaulting on its foreign currency debt. Public opinion—and the fear of being hit by sanctions—has compelled Western businesses to flee the country en masse. Soon, Russia will be unable to produce necessities either for defense or for consumers because it will lack critical components.
Continue reading at www.foreignaffairs.com
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