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I analyze energy economics and issues related to public policy.
Battles of attrition are determined when opposing forces do not directly confront each other with the full strength of their team but instead aim to destroy each other over a period of time. Classical free trade is largely voluntary and mutually beneficial for the parties to agree. But unilaterally imposed economic policy sanctions aimed at forcing certain patterns of international trade and economic exchange can be seen as an attempt to win a battle of attrition.
The latest headlines on the attrition front from Germany, the epicenter of the continent’s volatile energy geopolitics after the West introduced sanctions on Russia, may seem hard to believe at first glance. first. Only about a month ago when what seemed so incredible report of Deutsche Bank predicts that “the wood will be used for heating purposes where possible.” Business Insider headlined “Germans may turn to wood this winter to heat their homes as Russia restricts natural gas, Deutsche Bank said.”
Last week, Javier Blas of Bloomberg tweeted with his “chart of the day” showing GoogleGOOG + 0.4% the search for firewood (“Brennholz”) has increased over the past two months as Germans increasingly realize that firewood (yes, firewood!) can exist between them and a cold winter with electricity allocations “when the country is in the middle of nowhere.” suffering from a lack of natural gas.” German citizens – live in the world’s most technically superior country with production-leading BMWs and Audis, world-leading petrochemicals represented by giant BASF and many others – face the prospect of surviving the winter as their ancestors did more than two centuries ago, huddled around a wood fire. Never mind that many of them including their leaders actually believe like Greta that continued use of fossil fuels will lead to the destruction of the planet (in 12 years or in the middle). or the end of the century with a series of climate alarms).
Russia vs “Western”
Days after Russia launched a “special military operation” in eastern Ukraine on 24 February, the US, UK and the European Union along with their closest allies (Australia, Canada, Japan) , Korea and some other countries) have imposed the economic flash on the widest scale over a sovereign country since the Second World War. The sanctions introduced against Russia are intended to wreak havoc on the Russian economy and force President Vladimir Putin to sue for peace on Ukraine’s terms or even the arising change mode.
Russia responded with a sentence “rubles for gas“For “unfriendly” countries (i.e. those participating in sanctions) serves as the prototype for all major Russian exports to a hostile alliance of the West. In the days following sanctions, Russia’s ruble fell to nearly half its pre-invasion level, its stock market closed, and its central bank raised interest rates. contain radioactive dust. Contrary to President Joe Biden’s expectations and bragging about collapsing’rubles to ruins’ however, the coin soon recovered strongly. It rose to a 7-year high while the country’s current account surplus grew record level in May.
This is only partly due to actions by Russia’s central bank to limit cash outflows and raise interest rates. It is mainly the result of rising global prices of fossil fuels and industrial commodities, which are the main exports of the country. According to one Reuters report Yesterday’s higher volume of oil exports, coupled with rising gas prices, will boost Russia’s income from energy exports to $337.5 billion this year, up 38% in 2021, according to a new report. Ministry of Economy document released by newswire.
The latest of the IMF World economic outlook enacted at the end of July cut growth forecasts for almost every country but upgraded Russia’s economic forecasts. Russia is still expected to collect 6% this year, although this is a significant improvement from the IMF’s negative 8.5% forecast for April.
While energy exports to Western countries, China and India are in decline speed up import their energy from Russia at a discounted price. While China is negotiating with Russia to buy oil to replenish their strategic reserves according to BloombergIndia has refined crude oil cheaper than Russia then export like petroleum products to Europe and WE.
In an irony that observers of European affairs will not lose, Robin Brooks, chief economist at the Institute of International Finance, said that the West is “paying a heavy price” for denying Russian energy to themselves, even though the EU’s “exemptions” from sanctions are increasing. Meanwhile, Russia’s financial conditions are now almost as relaxed as they were before the war.
I also Note that Germany’s current account surplus “has returned to levels last seen in the early 2000s, when Germany was Europe’s ‘sick man'”, adding that Germany is “sick again” as it had a growth model “based heavily on cheap Russian energy”. The Nordstream-1 gas pipeline – Germany’s main gas supply artery – is running at 20% of conventional supply and leading to energy price shock in the Eurozone – is Putin’s threat to European throats”catastrophic industrial shutdown“And mass layoffs.
Russian citizens, although poorer, do not seem to do so badly compared to their German neighbors. Retail spending at cafes, bars and restaurants that are doing well. Good Muslims can miss out on their I-phones and Gucci handbags under sanctions and the voluntary withdrawal of publicly conscious Western corporations. But commoners certainly aren’t looking for firewood this winter or worrying about being able to take a hot bath.
G-7, BRICS and the rest
The battle of attrition between the G-7 and Russia continues as US Secretary of State Antony Blinken recently continued “a seduction attack in africa to regain the popularity of the United States that ostensibly lost under the Trump administration, and to counter efforts from Russia to attract more African nations to its side. In a statement to the press with Mr. Blinken sitting beside her, South Africa’s Foreign Minister Naledi Pandor says that she opposes the “increasing bullying” coming from the West: “Because when we believe in freedom – as I’m saying, it’s freedom for all – you can’t say for Africa If you’re doing this, you’ll be punished by the United States… One thing I definitely don’t like is being told “either you choose this or that.”
Making similar views diplomatically, the Minister of External Affairs of India Dr. S. Jaishankar said at a conference in June when he took a question from an audience member: “I am one fifth of the world’s population. Today I am the 5th or 6th largest economy in the world… I feel entitled to my own presence. I have the right to weigh my interests and make my own choices. My pick will not be cynical and transactional. They will be a balance between my values and my preferences. There is no country in the world that disregards its own interests.”
In his speech yesterday in Bangkok while attending a meeting of the India-Thailand Joint Committee, the Minister defended India’s import of crude oil from Russia. He mentioned the increase in energy prices around the world due to the Russo-Ukrainian war and said: “We are very open and honest about our concerns. I have a country with a per capita income of $2000, these are not people who can afford higher energy prices. It is my moral obligation to secure the best deal. “
In a sensational article last week titled “Washington is only to blame for increasing the trend towards de-dollarization”, China Global Times stated: “The thought that the US can take the assets of anyone who refuses to obey Washington’s orders is truly astounding, which is currently causing many countries to diversify their reserve assets. from the US dollar.” Russia, China and India have engaged in efforts to facilitate trade through the use of their national currencies and a potential basket of BRICS as the basis for trade in goods among external countries. Western Union.
Potential future members of the BRICS bloc such as Saudi Arabia, the United Arab Emirates, Iran, Indonesia, Nigeria and Thailand have clearly stated – openly or neutrally in their trade relations. trade and diplomacy with Russia and the West – that they will not “choose sides” as Dr. Jaishanker of India put it. There is little reason to believe that the EU or the US can surpass developing countries to participate. join sanctions against Russia.
Collapse
Financial and trade sanctions against Russia by Western protagonists have led to an economic war of attrition whose outcome remains uncertain and far-reaching. It looks increasingly possible that Russia will achieve at least its immediate goals on the military battlefield in eastern and southern Ukraine, at the expense of enormous human and material costs. However, the cost of Western economic sanctions against Russia unstable have more consequences for the lives and livelihoods of people around the world.
The Western Coalition, led by the US under the Biden administration, does not offer the prospect of a negotiated solution to the Russia-Ukraine conflict as called by Henry Kissinger at the Davos conference in May. In fact, the mainstream media and Western political leaders have continued to escalate the narrative of a Russian military defeat with the regime’s seemingly endless supply of money and weapons. Biden for Ukraine.
Pensioners and the poorer sections of society in Western Europe and the UK, unable to afford skyrocketing heating and electricity bills, will be the most affected neighborhood victims. best. But even worse injuries to people’s lives and livelihoods will be among the populations of developing countries living in poverty or in its peripheries. The increase in food, fertilizer and fuel prices due to sanctions will most severely punish the remote and innocent poor.
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