Every day brings more sanctions from the United States on how to better strangle Russia. Yves Smith, a financial analyst, believes that sanctions could have disastrous consequences and that excluding a major resource-producing country from the global supply chain would wreak havoc on the already pandemic-stressed supply chains.

Furthermore, the Western business press’ fixation on the hollowed-out financial system, which ignores the real economy, may lead to overlooking the long-term consequences of economic sanctions:

  • The US has prevented Russia’s central bank from using $300 billion of its foreign exchange reserves. There are many countries that have significant foreign exchange reserves. Can they trust that the US will not do the same with them if they disagree with US policies? Non-Western economies, which make up the vast majority of the world, may view these moves as an alarm bell and begin a process of moving away from the US dollar.
  • Buyers of Russian oil have been unable to open letters of credit from Western banks to cover purchases. Letters of credit from the bank of the buyer are the standard practice in commodities trading as they guarantee the seller’s bank that payment will be made in full and on time. There will be a major fall-out affecting the international trade process if letters of credit are unacceptable.
  • Russia and Ukraine provide about 40 per cent of the global supply of fertilizer. As Russia cannot use the Black Sea for logistics purposes and others cannot use letters of credit to pay for fertilizer, the impact can be devastating, especially for poorer nations.

A lack of fertilizer means a huge reduction in grains output, and that spells famine. Couple that with a reduced output of wheat from Russia and Ukraine for the international market, and the human toll will be devastating.

  • Russia may block raw-materials exports in response to the currency and SWIFT sanctions. This threatens to rattle key materials’ supply chains, including cobalt, palladium, nickel, and aluminium. If China decides to see itself as the next nation being threatened and joins Russia in a common protest against US trade and financial warfare, the Western economies are in for a serious shock.

Russia is a major producer of sapphire substrates – the thin plates made of artificial stone, which are used in every chip-making process in the world, including those made by AMD and Intel.

Russia also accounts for 100 per cent of the world’s supply of various rare earth elements used in special chip etching chemistry, as well as 70 per cent of the world’s supply of neon gas, an inert gas that is also used in the semiconductor lithography chain. Should Russia retaliate, what impact could that have on the global hi-tech industry? China could definitely benefit from their relationship with Russia vis-à-vis these minerals to support their hi-tech industry.

Russia, contrary to the propaganda of Western media, is an economy rich in natural resources, and it ranks among the world’s top six economies in terms of purchasing power parity. China’s real economy is the most developed in the world, accounting for 28 per cent of world manufacturing and high demand for energy and agricultural imports.

As a result of the wave of sanctions imposed by the West, the complementarity and engagement of the Chinese and Russian economies will only deepen, and there are huge opportunities for cooperation between China and Russia in areas like the digital economy and defense. Russia will not be easily crushed by economic and financial sanctions if this pattern continues.

The intensified US sanctions will be a long and protracted war that will not achieve its goals, and Russia will not be the only country to suffer. The US sanctions are a pyrrhic victory but will accelerate and deepen the Russian and Chinese economies’ independent development in hi-tech, finance, and trade de-dollarisation.

According to a Credit Suisse analysis report released on March 7, the current crisis is unprecedented since President Nixon decoupled the dollar from gold in 1971, and that once the crisis (war included) is over, the hegemony of the dollar will be weakened, while the Renminbi will strengthen significantly, supported by a basket of real commodities.

This analysis could be interpreted as a prognosis of the situation by the Western financial community. Once again, contrary to the Western media propaganda, the draft resolution entitled “Aggression in Ukraine” did not receive overwhelming support at the Eleventh Emergency Special Session of the UN General Assembly on March 2.

Governments representing more than half of the world’s population either voted “no” or abstained, a choice which obviously does not mean “yes.” Both India and China, together representing more than 25 per cent of the world’s 7.9 billion people, abstained from the vote.

“It is almost black humour to look at US attempts to convince China that it should join the United States in denouncing Russia’s moves into Ukraine. The most enormous unintended consequence of US foreign policy has been to drive Russia and China together, along with Iran, Central Asia, and other countries along the Belt and Road initiative,” stated Michael Hudson.

Sanctions are and will continue to hurt Russia, that is true. Other countries have also been the victims of US sanctions. The US has had sanctions for more than 60 years against Cuba, where the people have not only survived, but continue to support revolutionary movements across the globe, especially in the area of medical assistance and education for poor countries.

Venezuela has been sanctioned, and her people have suffered. But they continue to work towards regaining some sense of economic normalcy. Iran has been sanctioned. But today Iran looks to a partnership with China and Russia to develop their economy and provide an alternative for other politically independent nations. North Korea has also been sanctioned.

They have had a very difficult time, but they are still standing. People around the world realize that the US stick of sanctions is not as invincible as they claim, and that the fight against US hegemony is, despite the hardship, not hopeless.

Countries with sixty-five per cent of the world’s population have not endorsed the US-led sanctions. Perhaps this time the US has overstepped its bounds.

The world is probably witnessing the defeat of the US’ quest for unipolar hegemony. Not today, not tomorrow, but the time is coming. As Mao said, this is a protracted war, and the righteous people, though they cannot win quickly, shall prevail in the end.

Fred M’membe
President of the Socialist Party


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