Ukraine crisis: A war that is hurting the West more than Russia
Ukraine crisis: A war that is hurting the West more than Russia
Are Western sanctions on Russia hurting the West more than Russia? Russia has slashed oil and gas supplies to the Western alliance that is, for all practical purposes, at war with it, Here are some facts.
Germany has reported its first monthly trade deficit — €1billion — since 1991, after exports “unexpectedly” fell in May. Yasmin Fahimi, the head of the German Federation of Trade Unions, told a newspaper last week that entire industries are in danger of permanently collapsing because of cuts in the supplies of Russian natural gas — aluminium, glass and the chemical industry.
At the end of April, Berlin stated that oil from Russia accounted for 12 per cent of total German imports. However, in May, the percentage was actually determined to be 27.8. Now imagine what happens when Vladimir Putin decides not to supply oil to you.
Britain’s trade performance fell to its worst level since records began in 1955, with the current account deficit being 8.3 per cent of gross domestic product in the first quarter of 2022, up from 2.6 per cent in 2021. Prime Minister Boris Johnson has already warned that the country could see power cuts in the winter in case of a shortage of Russia fossil fuels.
In June, Poland saw a year-on-year inflation of 15.6 per cent, the highest figure since 1997. Gasoline prices are up 46.7 per cent and energy up 35.3 per cent.
From 11 July to 21 July, NordStream 1, the longest sub-sea gas pipeline in the world, with a total annual capacity of 55 billion m3, which supplies Russian gas to Germany and several other Western European countries, will be shut down completely for scheduled repairs.
That should be interesting.
Meanwhile, Russian oil production in June has risen to 9.9 million barrels per day, up more than 5 per cent from May. Everyone wants to buy, but Putin decides whom he will sell to.
Think about that for a moment.
One of Joe Biden’s (wild) promises, when he ran for president in 2020, was that he would shut down American fossil fuel companies. Today, as president, he is complaining that US oil companies are not producing and refining enough oil. He is also more or less begging Saudi Arabia — a country he called a “pariah” during his campaign — to produce more oil and has been met with a non-committal response.
At the recent meeting of G7 leaders, that cosy club of mostly white men, it was decided that G7 would explore ways to put a cap on Russian oil and gas prices. How on earth that can be done is anyone’s guess.
Meanwhile, investment bank JP Morgan has warned that if the US and European penalties prompt Russia to inflict retaliatory crude-output cuts, the price of oil may rise to an all-time high of $380 per barrel. It’s about $110 right now. JP Morgan analysts stated in a note to clients that Moscow can afford to reduce daily crude production by 5 million barrels without significantly harming the economy, given the country’s strong budgetary situation.
As I wrote a few days ago, this war has been foisted on the world by the delusional and arrogant West. However, it is still surprising that so many European countries have bought into this narrative. According to one estimate, the US military aid to Ukraine is averaging $145 million a day. This is more than any US aid ever, including when it was directly at war in Iraq and Afghanistan.
Given the corruption that has always blighted Ukraine, half of these weapons are possibly being sold — any price would be a 100 per cent profit since they are coming free — to the rebel forces in eastern and southern Ukraine.
If one cuts through the clutter of Western mainstream media, both Left and Right wing, it is clear that in the last one week, Russian forces have been winning the battles. They now occupy 30 per cent of Ukraine and they can indefinitely continue this grinding war. As Napoleon and Hitler realised at their own cost, Russia is very good at grinding wars.
There are several learnings here.
One, real stuff is what really matters. Russia is the world’s most physical-resource-rich country and much of the rest of the world depends, to varying extents, on some of its riches. If WhatsApp or Twitter is banned, you will survive, even though you will have severe withdrawal-related issues for some days. In fact, it will be easier than what you go through when you quit smoking after two decades of 20 cigarettes a day. But when Russia refuses to send oil and gas and wheat and minerals and even sunflower oil to your country, the pain is more immediate and higher. Absolutely the opposite of cryptocurrencies, which collapsed recently, Russian wealth is real. Cryptocurrencies never had any underlying value. Russia’s produce is value itself.
Two, call it by any name — the developing world, emerging markets, the global South. At least 80 percent of the world’s nations are not interested in this war. They may not overtly take sides, but they certainly are not swayed by Biden’s mumblings and Boris Johnson’s rhetoric. In this war, the West has fully isolated itself from the rest of the world while it foolishly believes that it is isolating Russia.
Three, gambling is not one of my many vices, but I can see that the West has upped its stakes too much and only a very lucky draw can recoup its bets. As one commentator put it, “It’s the sunk-cost fallacy. You’ve already invested so much on the opening bet, then more on the subsequent flop, and more still on the turn, that your pride or your fear moves your hand forward at the end.” The West has left itself no way to de-escalate and negotiate a peace.
Neither has Volodymyr Zelenskyy, the classic case of a man gifted a ladder to climb up to the top of a wall and then the rented ladder was returned to the owner. A few pieces of meat loaf are thrown every day to the stranded man, but he cannot find his way down. There’s a three-letter word for it. Ego.
It will be very difficult for the West to quit now. But let me make a prediction. Each and every leader of these democracies will lose their post, whenever the next election takes place. If Ukraine had abided by the internationally recognised Minsk agreements that called for some autonomy for the Russian-majority Donbass region of Ukraine, none of this would have happened.
Four, there is no reason now (if ever there was any) to trust the West. If the West can seize sovereign funds and confiscate private property and expel players from sports tournaments, the world is up for grabs.
And we are doing fine. Among all the major world economies, India and China are the best-placed to weather this current rough weather. Or rude awakening. It is time to develop alternative systems for everything that the West has foisted on us — international credit cards, international money transfers, a new global reserve currency. It is already taking birth.
People like Biden and Johnson are helping our way to these. The world will no longer be the same by the time the Ukraine war ends — whenever it does. And it is up to us to make sure it won’t be the same.
The writer is a former editor of ‘Financial Express’, and founder-editor of ‘Open’ and ‘Swarajya’ magazines. Views expressed are personal.