The US and EU are deluding themselves on the likely efectiveness of Russian sanctions. The end result could be the de-dollarization of the global economy and massive commodity shortages worldwide...
While politicians and media in the western 'democracies' have been playing "We the guys in white hats, they the guys in black hats over the kerfuffle between Russian and Ukraine the real war is being fought on a very different battlefield. BoJo and Biden the two circus clowns of the western alliance can bluster all they want, the fact is while public attention is diverted by propaganda form each side about the atrocities of the other in Ukraine, in the battle being fought in financial and commodity markets, Putin has the NATO alliance by the bollocks.
Prior to the outbreak of hostilities Europe was in the throes of an energy crisis due mainly to the folloy of green energy obsessions leading to energy policies which entailed reliance on unreliable and intermittent sources such as wind and solar farms, with the only fallback being imported oil and natural gas from Russia. The USA, while not in as bad a position as their European allies, are experiencing problems of their own with rising energy costs driving millions of homes into poverty.
On top of that, and a few days behind this blog it has to be said, mainstream media seems to be catching on to the fact that Russia and Ukraine are key suppliers of wheat, maize and food - oil crops, supplying around a third of the total wheat exported around the world. It's unlikely Ukrain will be producing its usual quantities of these essential foods, it's rather difficult to tend and harvest crops when the bombs and shells are falling on your fields and the majority of the workforce have been conscripted into the military. And Russia? As sanctions hit, either nations will be barred from buying Russian wheat by sanctions imposed on trade, or Russia will stop exporting wheat and its other crops in retaliation for the sanctions. Either way this will force up food prices and the overall cost of living.
And then there is the impending fertilizer crisis, again this blog reported a week ago that Russia produces around two thirds of the world's ammonium nitrate, the main ingredient in commercial fertilizers. Foreseeing the imposition of western sanctions the Russian government blocked all exports of Ammonium Nitrate early in February. This will result in vast reductions in crop yields, with a knock on effect on food availability and prices in the shops of European and American towns.
ofg all this, government economists and economics correspondents in the
west are still insisting these NATO sanctions , particularly removing
several Russian banks from the SWIFT international finance system and
confiscating a few mansions and luxury yachts owned by oligarchs will
will “ruin Russia financially,” As this does not align with the view of
our own economics experts, Phil T. Looker, we looked for any analysis of
the situation that owed more to facts than to a desire to remain in the
safety of the herd. Michael Hudson, co - author of a revised edition of
the must-read critique of American economic bullying, Super-Imperialism: The Economic Strategy of American Empire. is one of the few economists to break ranks.
Hudson remarked how he is “simply numbed over the near-atomic escalation of the US.” On the confiscation of Russian foreign reserves and cut-off from SWIFT,observes he the main point is “it will force Russia to put in a new system, with China. The result will end dollarization for good, as countries threatened with ‘democracy’ or displaying diplomatic independence will be afraid to use US banks.”
In reality there is no need to speculate on how quickly a new Russia-China payment system bypassing SWIFT, and combining the Russian SPFS (System for Transfer of Financial Messages) with the Chinese CIPS (Cross-Border Interbank Payment System), it is already in place. Hudson has no doubts “the Russian-China system will be expanded. The Global South, Africa where many nations are quietly supporting Putin and South East Asia where nobody wants to antagonise The Chinese, will seek to join and at the same time keep SWIFT – moving their reserves into the new system.”
This, Hudson says, leads us to “the great question: whether Europe and the Dollar Bloc will be able to buy raw materials controlled by Russia and China, not just food crops and fossil fuels but lithium, cobalt, palladium, rare earth metals etc, which are essential to high tech industries, particularlt the manufacture of batteries for electric cars which the powers that be have decided we must all be driving by the end of the decade and whether China will join Russia in a minerals boycott.” Again we see that western political and business leaders have not thought their policies through, while pursing a campaign of provoking Russia for the past ten years they have not given a moments consideration to the consequences of the confrontation the assiduously sought, hoping it would provide the pretext for recruiting Ukraine into the NATO alliance, thus continuing the encirclement of Russia.
Russia’s Central Bank has foreign bank assets and gold which it can use to prop up the Rouble in curreny exchange markets and defend the economy. The ruble has plunged in western markets but Russia has plenty of buyers elsewhere for its commodities. There will be new trade routes via proxies. It is up to Russia to decide whether to sell its wheat to the west where customers will pay top price or Asia and Africa where it is needed; or to stop selling oil, gas and fertilizer to Europe and the USA. The problem is Russia has very little trade with the west apart from in the commodities mentioned here. Sanctions imposed so far do not prevent European nations buying Russian gas and oil. China and the Arab state will no doubt be happy to act as middlemen for other commodities and charge an enormous premium for receiving an invoice and sending out a new one.
The propaganda we are fed in western news may suggest Ukrainian resistance is thwarting Russian advances everywhere but in the real economic battlefield it looks like Russia is winning hands down.