Actions from inactivity

Own system analogue SWIFT will be launched - work is underway. This was stated by the head of the Ministry of Finance Anton Siluanov, the correspondent of The Moscow Post reports.

A new test is approaching the global economy, which has not yet recovered from the pandemic. It is difficult to assess the economic consequences of anti-Russian sanctions, but they already exist and this forces Western politicians to make certain decisions. Midterm elections to the American Congress are approaching, the White House has to shift its focus from close to the Bidens of Ukraine to domestic political problems, inflation rates, fuel prices, the growth of which has already been blamed on Russia.

To Elections Through Oil

The reason is understandable: The Democratic Party is predicted to lose control of the Senate and the House. The presidential election is also just around the corner, and Biden has nothing to show yet, except for the crisis and the impending failure, now in Ukraine.

The first signs of a rush at the White House have already appeared. In preparation for the elections, the US President "printed" the Strategic Oil Reserve, decided to release 25 million tons of oil on the market. This should be supported by the allies in order to calm the markets, contain the rise in prices in the United States itself, and limit inflation before the elections.

But the scope of the problem is broader. Ideologues in the US administration are rocking the global economy. "Joe Biden not only did not adjust the policy of unilateral restrictions on trade of the Trump era, but took a number of ideological steps during the Cold War, which caused even greater harm to the global economy," said Cao Heping, professor at the Peking University School of Economics in an article for the Huanqiu Shibao newspaper.

Finance Minister Janet Yellen warned that an embargo on Russian oil exports would cause prices to skyrocket. Her German counterpart Christian Lindner also believes that the hasty transition from Russian gas to LNG is problematic. For Germany, this transition will bring more problems than for Russia.

This does not limit the problem. JPMorgan chief executive Jamie Dimon warned shareholders that sanctions imposed over Russia's special operation in Ukraine were undermining markets and key supply chains, fraught with economic turmoil. It is not yet known how Moscow will respond to the sanctions. If the answer is, it can hit supply chains in the field of materials and raw materials, including fertilizers, agricultural products, oil and oil products.

Sanctions Against Yourself

Strangling the enemy with sanctions is one of the techniques used against Cuba (since 1962), Vietnam (in 1975-1994, with the exception of the arms embargo, which was suspended in 2016), North Korea (since 1950) and Iran (since 1979, in full since 2018). As Le Monde diplomatique noted, although the effectiveness of sanctions raises questions, Washington and the EU are increasingly using them. Between 1918 and 1998, the United States restricted trade with countries under sanctions 115 times, including 64 times in the 1990s. In 1997, countries in which half of the population lived were under sanctions.

The US and Europe have experienced sanctions on themselves in the form of the 1973 oil embargo. Three months after its introduction, the price of oil quadrupled. The embargo on Europe did not apply, but there fuel prices also increased, a card system was introduced for gasoline sales, and speed on the roads was limited.

The Spanish newspaper El Pais believes that the oil embargo against Russia, which Brussels is considering, could lead to negative consequences for the EU. This measure can cause a boomerang effect on the global oil market, lead to impoverishment of the EU and "enrichment" of Russia. Five European states opposed the embargo. This was reported on April 8 by the British edition of the Daily Express.

The protest was led by Hungarian Prime Minister Viktor Orban, but the risks of such a decision worry Italy, Austria, the Netherlands, as well as Germany, which buys 45% of gas and 30% of oil from Russia. Die Welt said on April 5 that an embargo on Russian hydrocarbons could leave the EU with empty shelves.

The losses from the severance of ties with Russia cannot be estimated. Ideologues of opposition to Moscow proceed from the fact that Russian GDP may decrease by the end of this year by 10% or more, but so far they refrain from assessing the consequences for their economy. Western analysts, including economists at JPMorgan Bank, predict that growth in the eurozone could be about 2%, which is half the forecast for the beginning of the year.

Who is the benefactor to whom?

It is technically possible to reduce Europe's dependence on the nearest and most economical energy sources. This will require not only investment, but also significant time to rebuild the energy supply system, will affect natural gas prices. Plans to abandon Russian gas will lead to competition with Asia. In the future of three to four years, a global LNG deficit of 100 million tons can be expected, which exceeds the annual LNG import by China, which has become its largest importer.

Europe should not take Gazprom for granted. The Institute of German Economics, for example, believes that Germany cannot do without Russian gas "for at least two years." Industry will not be able to stay on state contributions for a long time. Expensive gas will stop the production of not only glass or steel, but can ruin the chemical and automotive industries in Germany.

Gazprom is integrated into the EU economy and until recently ensured the energy security of Europe, primarily German industry. Russian gas supplies gave Germany the opportunity to compete in world markets. To many other European countries, gas provided comfort in homes and the commercial sector. Russia provided Europe's energy needs better than one might imagine.

There is no reception from Gazprom

Deputy Head of the Security Council of the Russian Federation Dmitry Medvedev sarcastically named the five steps that Europe should have taken to be left without Russian gas: freeze Nord Stream, freeze the assets of the Central Bank of Russia, declare its refusal of Russian gas in the next couple of years, refuse to purchase rubles for payment for gas at the exchange rate of the contract and conduct searches at Gazprom offices in Germany. Everything has already been done, except for the refusal to pay for gas imports in rubles.

Regarding the search of offices, Bloomberg reported that the investigation began before the start of the operation in Ukraine on the statements of European politicians that Gazprom could manipulate its position. In March, European Commissioner for Energy Kadri Simson announced this to the European Parliament.

External pressure on Germany over imports of Russian natural gas and the Nord Stream 2 project began under Trump. He was confident that American LNG could become a replacement for the project. The Biden administration continued this topic, but already under the slogans of "a bad idea for the United States" and the fact that this is contrary to the interests of the EU. Poland and Ukraine took an active part in the strides on Berlin.

After the start of Russia's special operation in Ukraine, demands on Berlin to speak out for a boycott of Russian energy supplies began to grow. The German government faced a choice - to continue importing gas, oil and coal from Russia or take responsibility for the economic consequences of the gas embargo and lean towards LNG imports. By the way, Germany does not even have terminals for receiving LNG.

"In the coming months, the situation can still be kept under control, because the heating season is coming to an end. But the German government and thousands of companies are horrified by next winter. If German gas storage facilities are not filled with gas from Russia in the coming months, then in Germany it will be too small to cover the need. Therefore, you have to determine priorities. Many gas power plants will have to be disconnected from the network, but many enterprises will also lose gas supply, "said Jürgen Flauger, head of the Enterprises and Markets department of the Handelsblatt newspaper.

Gold billion "on the forehead"

The German government has obtained from the EU the removal from the sanctions lists of some metals needed by German industry. It is reported that Germany, during confidential negotiations with the EU in mid-March, ensured that certain metals supplied by Russian companies were not included in the list of sanctions. The restrictions did not affect nickel, palladium, copper, iron ore, aluminum and titanium. The ban on their import will affect industry until some industries stop.

The global aluminum market, which has been operating in recent years amid shortages, is waiting for reconfiguration. Australia announced a ban on the export of alumina and aluminum ores, including bauxite, to Russia. The embargo is aimed at the Rusal company. The EU has experience in imposing sanctions against RUSAL. In April 2018 - January 2019, aluminum supplies were suspended. Raw material prices then rose by 30%. RUSAL provides 6% of the world's aluminum supplies (70 million tons in 2021), 90% of which is produced using hydroelectric power.

The Office of Foreign Assets Control (OFAC) of the US Treasury Department on March 24 published a new general license, which removed Russian mineral fertilizers from possible sanctions. They were included in the list of vital products on a par with agricultural products, medicines and medical products. Europe depends on Russian supplies, receiving 25% urea, 15% ammonium nitrate, a third of phosphate fertilizers and 35% potassium. In the United States, the share of the Russian Federation in imports is 6% for potassium, 20% for diammonium phosphate and 13% for urea.

In Finland, a shortage of aspen, alder and Siberian larch is expected, which are used for the construction of saunas and terraces. The choice and prices of lumber are becoming a problem. Coniferous rails and chipboard - materials necessary for the Czech company Sapeli to produce doors and boxes for them. But material prices are rising and the market is becoming scarce. The largest wood exporters include Russia and Ukraine. Russia exported about half of the wood harvested. About 27% of volumes were supplied to Europe, 57% was exported to China, which is ready to increase purchases.

These and other examples make it clear the scope of the economic uncertainty that the countries of the "golden billion" also face. Their economy will also suffer losses from a slowdown in growth, loss of enterprises and industries, new threats to energy security, devaluation of significant plans, such as the "greening" of energy.

Coming Out of the Washington Consensus

If to call things by their proper names, the new wave of sanctions is the attempt of the West, the third for the last hundred years, to test Russia for durability, now hybrid Ukrainian threat, direct political and economic pressure. Blocking the reserves of the Central Bank leaves no other choice how to form reserves in the form of the gold reserve of the Central Bank and the obligations of the state.

Russia will withdraw from the so-called Washington consensus when the Bank of Russia issued rubles for de facto foreign currency receipts. The money supply will grow in response to the needs of the economy and the requests of the state, its debt obligations. This is how the economies of many countries work. This should stimulate economic growth, reduce the country's vulnerability to sanctions.

Representatives of the BRICS countries at a meeting on April 9 discussed cooperation through the New Development Bank, infrastructure investment, and the creation of the BRICS research network. The central banks agreed to conduct the fifth test of the BRICS Conditional Foreign Exchange Reserve Pool mechanism using alternative currencies.