GT Voice: Western sanctions only create more problems for the global economy
Published: Mar 02, 2022 08:04 PM
US is barking at the wrong tree by sanctioning China.Illustration:Tang Tengfei/GT

Illustration:Tang Tengfei/GT

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The situation in Ukraine has not only drawn global attention, but also offered a peek into the invisible "world war" taking place on the financial battlefield, where the US and its allies are relentlessly and recklessly attacking Russia economically.

After the outbreak of the military conflict between Russia and Ukraine last week, the US and some of its allies have used their dominant positions in international finance, technology and global markets to slap severe sanctions clearly aimed at crippling Russia's economy and financial system.

Specifically, the US and its allies moved to block a number of Russian banks' access to SWIFT, the financial messaging system that supports most global transactions. They also said that they would freeze the Russian central bank's foreign reserves, which is estimated at more than $600 billion.

It is undeniable that the unprecedented sanction package will have a significant impact on Russia's economic stability. But it is highly doubtful that such sanctions will facilitate a diplomatic solution to the current conflict. The world needs to come to realize that no peace could be achieved by imposing sanctions, which will only inflame tensions by harming Russia, making Ukraine a victim and holding the EU hostage.

Judging from the sanctions the US imposed on other countries in the past, US economic sanctions based on its financial hegemony usually have a devastating impact on some countries that rely heavily on exports, while having a relatively limited impact on countries with high levels of self-sufficiency. Russia is highly self-sufficient across major commodities like energy, minerals and food, enabling it to play an irreplaceable role in global industrial chains and supply chains. This is also why sanctions will probably not cripple Russia's economy, despite some financial turmoil.

In this sense, instead of resolving the Russia-Ukraine conflict, sanctions will only create new problems by escalating tensions and sabotaging the environment for peaceful resolution. After all, Western powers, which have so far refrained from sending troops to fight Russia in Ukraine, have in effect unleashed economic attacks on Russia through the sanctions.

The key to resolve the current conflict is not just to force Russia to back down, but to also offer Russia the security assurance it seeks. Just as Chinese Foreign Ministry spokesperson Wang Wenbin said earlier this week, when NATO pushed forward with five waves of eastward expansion, Russia's legitimate demands should be taken seriously and addressed properly. The same is true on the financial front. If the US and its allies deprive Russia of its economic security with sanctions, it is not impossible that Russia will strike back. For example, Western institutions may face a growing risk for trillions worth of their assets in Russia.

Fundamentally speaking, sanctions are a double-edged sword that will harm the Western countries too, which is expected to be reflected in the galloping inflation in the US and the exacerbating energy crisis in Europe. Most importantly, they are threatening to undermine the global economy, especially at a time when the world is still struggling with inflation and supply-chain glitches.

While Russia may not have as much financial clout as the West, it is crucial to the stability of several global supply chains. In 2021, Russia is the world's second largest oil exporter and largest natural gas exporter. Russia is a major supplier of key strategic mineral resources such as titanium, palladium, neon, nickel and aluminum, which are crucial for downstream industries like military, aerospace, aviation, semiconductor, electronic component, and automobile manufacturing. In addition, Russia also supports the world food supply by being the largest wheat exporter and one of the largest exporters of several key fertilizers.

If the US and its allies push Russia too harsh on the financial front, that could leave the global supply chains even more vulnerable to disruption, which may risk derailing the global economic recovery.

For China, as officials have repeatedly made it clear, it will not join such sanctions and will, as always, carry out normal economic and trade cooperation with Russia and all parties.