Global Economy Is In Danger But Not Russia

Russia has just announced its military operation in Kyiv in the midst of soaring tensions between Moscow and Washington. Add to that, Germany said it’s no longer interested in the Nord Stream 2 project. Now, Berlin is looking for other alternatives. But we have real doubts that the ongoing pressure on Moscow will deter Vladimir Putin.     

The Chinese Embassy said explicitly that sanctions are not effective. Since its annexation of Crimea in 2014, Russia has been looking for alternatives to the US dollar in its trading deals. 

In order to deal with US sanctions, Russia has taken systematic steps to reduce reliance on the US dollar, such as using the Euro or the Yuan to settle trade payments, analysts said. Ironically, the soaring tensions may affect Russia’s economy. But, the prices of oil and gas will rise dramatically, which means more money for Moscow and the Gulf States President Vladimir Putin said, in what amounted to a declaration of war, “We have taken the decision to conduct a special military operation.” 

He claimed it was for the “demilitarization and denazification”, adding “We do not intend to occupy Ukraine.” 

“To anyone who would consider interfering from the outside: if you do, you will face consequences greater than any you have faced in history.”

But to be honest, the world will suffer from the so-called Russian invasion of Ukraine. Egypt, for instance, relies too heavily on Russian Wheat. The Egyptian Tourism industry is expected to suffer as well, given the soaring number of Ukrainian tourists who landed in Egypt last summer. Though the Egyptian government has announced its new plans to find alternatives to the Russian/ Ukrainian Wheat, the Middle East will suffer a lot in case of a full-scale Russian invasion.   

Europe would be hurt, too. Ukraine is considered the “breadbasket of Europe,” and an invasion would result in the food supply chain getting “hit hard,” said Alan Holland, CEO, and founder at sourcing technology company Keelva

“If tensions continue to rise and we see an increase in disruptions due to a potential war or sanctions, it will hold back manufacturing production in Germany. Factories would need to curtail production which would cascade to manufacturing in other countries,” said Atul Vashistha, chairman and CEO of supply chain risk intelligence firm Supply Wisdom.

Many nations in  Africa also rely on Ukrainian wheat and corn, and disruptions to that supply could affect food security in those regions, said Dawn Tiura, president at Sourcing Industry Group.

Besides the economic loss, renewed tensions will have a disastrous impact on civilians, especially those who are living in Ukraine, regardless of their nationalities. More than 40 Ukrainian soldiers and around 10 civilians have been killed in the fighting, according to the Ukrainian presidency.

Ukraine has suffered heavy casualties in its eight-year conflict with Russian-backed rebels in the separatist east but has reported no fatalities along its southern border with Crimea for some years. 

“The armed forces of Ukraine are waging heavy combat,” presidential adviser Mykhailo Podoliak said. “We have losses,” he added, without giving details. “In several places, the Russian armed forces have been repelled.” 

What can we expect from China? 

Though the international media is hyping up the Taiwan threat, it would be too naive to say that Beijing is ready to invade Taipei.  Frankly speaking, the Chinese Communist Party knows very well that Biden’s reaction to the Russian invasion of Ukraine will totally differ from his reaction to a Chinese invasion of Taiwan. 

Taiwan represents an important weapon for the US. Though it seems less important than Ukraine, Taiwan is the biggest producer of global semiconductors in the world. The American defense system relies too heavily on the Taiwanese semiconductors. Hence, if China thinks of invading Taiwan, the price would be too high for Beijing.  

Also, the Chinese government is less likely to lose a major trading partner like the European Union for the sake of supporting Russia. A 2020 report by the US-based Center for International and Strategic Studies says that the trade routes between Russia and China are still underdeveloped. Despite the two countries sharing a 4,000-kilometer border, there are only a few rail crossings and just 25 road crossings in total.   

But, to be honest, Russia is ready to face the consequences of its actions.