How Russia is Outsmarting UN-NATO Allies on Sanctions, by Michael Ogueke
America, NATO, European Union & all the Western political, economic, financial & sports institutions know that all the economic sanctions they are slamming on Russia will hurt their own European & American economies more than it does Russia.
Russia has taken adequate & concrete measures since 2014 to insulate its economy against Western sanctions. Russia has spent years preparing for these set of ridiculous Western sanctions.
In 2014, when Russian troops annexed Crimea, it provoked a first round of international sanctions against Russia & they learned. Since then, the Russian government have been setting up national economic defences, moving away from relying on the dollar, & trying to sanction-proof the Russian economy.
One of them is moving its international reserves away from the dollar. By January this year, 2022, the Russian government’s international reserves in foreign exchange & gold were $630 billion which is the fourth highest amount of such reserves in the world & this huge reserve is capable of propping up Russia’s currency, the rouble, for 3 – 4 years thus removing any significant shock on the Russian currency, Russian financial systems & the Russian economy generally in the long term.
It is equally important to note here that only about 16% of Russia’s foreign exchange is now actually held in dollars, down from 40% five years ago. About 13% is now held in Chinese Yuan, the rest 71% are in gold. In other words, only a paltry 16% of Russia’s whooping 630 billion dollars reserve are in America dollar. Even this too is insulated.
There have also been other changes in the structure of the Russian economy. Since 2014, Russia has reduced its reliance on foreign loans & investments, & has been actively seeking new trade opportunities away from Western markets. China, India & UAE (Dubai & Abu Dhabi) is a big part of that strategy.
The Russian government has also taken serious steps to creating its own system of international payments, in case it gets cut off from SWIFT – a global financial messaging service which is overseen by the major Western central banks, as they have already done presently.
Again, Russia has been cutting the size of its budget – prioritising stability over growth. That has meant the Russian economy has grown at an average of less than 1% a year over the past decade. But it has ensured that the Russian economy has become more self-reliant in the process.
Also, in the past 2 years, there has been a massive stockpile of over 25 billion dollars held in crypto & many other financial instruments of government.
All of these & many more that space & time will not permit here are designed to protect Russia from American-led sanctions.
Furthermore, Russia will bypass all the Western sanctions through her economic, financial, trade & technological strong allies.
Saudi Arabia has indicated that it will not increase oil production to bring down oil prices that have spiked because of the crisis & that it intends to stick with the output agreement it made with Russia in the OPEC+ format.
The United Arab Emirates (UAE) comprising of the two economic power houses in the middle east – Dubai & Abu Dhabi, along with China & India, abstained on a U.S.-backed UN Security Council resolution deploring Russia’s actions. They have equally taken far reaching steps in economic, trade, financial & military arrangements, agreements & pacts to always stand by Russia. The emir of Qatar has called for “all parties to exercise restraint” without casting blame on Russia. Qatar also pointed out that it simply cannot increase its liquefied natural gas (LNG) output or significantly redirect its LNG exports to Europe, thus, leaving Europe at the mercy of Russian gas.
Russia is the biggest producer of wheat in the World & during Putin’s visit to China on 4th February, 2022, he cemented a purchase agreement from China that guarantees market for Russian wheat should Europe impose sanctions on her wheat & with Turkey blocking the Dardanelles & Bosphorus Straits that connect the Mediterranean & Black Sea following the conflict in Ukraine, Egypt cannot import grain from Ukraine presently & thus is now heavily dependent on Russian wheat.
The Israeli foreign minister, though condemned Russia’s actions in Ukraine but Israel officially has stated its wishes to continue its “deconfliction” agreement with Russia because any abandonment of that agreement by Israel, Russia will not allow them use Syria to target strikes on their arch enemy – Hezbollah in Iran.
Both the E.U. & the U.S. pointedly refused to take aim at Russia’s biggest export, oil & gas. As we have noted before, Russia is one of the single biggest providers of natural gas to Europe, & hitting that could cause as much pain for the E.U. as it would Russia.
Western officials also disagreed about barring Russian banks from SWIFT, the payments system that undergirds international finance. (Britain is for it, while Germany is against.) In the end banning Russia from SWIFT will complicate Europe’s ability to buy oil & gas from Russia, & it will weaken the dollar’s role as the global reserve currency if it pushed Russia to develop an alternative system with allies – China & India.
In all these, Russia has not even imposed her own retaliatory sanctions on the West, yet, the West are already suffering the effects of their own sanctions.
Russia’s retaliatory sanctions could involve freezing or nationalizing the assets of Western businesses including hitech, media, manufacturing, shipping, oil & gas companies in Russia.
Already, the banning of flights from major Western airlines to Russia is hurting seriously the Western aviation industry.
In addition, Russia could quit cooperation & its role at the International space station. The International Space Station (ISS) is a modular space station (habitable artificial satellite) in low Earth orbit. It is a multinational collaborative project involving five participating space agencies: NASA (United States), Roscosmos (Russia), JAXA (Japan), ESA (Europe), & CSA (Canada). It is the largest artificial object in space & the largest satellite in low Earth orbit which maintains an orbit with an average altitude of 400 kilometres & circles the Earth in roughly 93 minutes, completing 15.5 orbits per day. Now, it’s important to note here that the Russian SOYUZ capsules are the only vehicle to send astronauts to & bring them back from the International Space Station.
And for the mother of all retaliatory sanctions, Russia could off its oil & gas supply pipelines to Europe & stop its between 12 – 15 million barrels a month crude oil supply to America & redirect a huge part of these supplies to China, India & other allies. The implication of this on the Western economies will be devastating.
Here in lies the greatest hypocrisy of the West on the conflict in Ukraine. The West are busy imposing all manner of useless & ridiculous sanctions on Russia which effects on Russia only exist in the propaganda of the Western media. But Europe & America have carefully avoided imposing sanctions on Russia’s oil & gas because it is fundamental to their self-preservation. While the West is supplying military equipments & missiles to Ukraine to help them withstand Russia until all their cities are destroyed by Russia & their entire population become refugees in foreign lands, the rogue America & their Western allies are busy buying Russian oil & gas to protect their own existence & economic survival. What a tragic treachery by the West on the Ukranians!
Professor Michael Ogueke #MO is a public commentator