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ECONOMICS AND FINANCE

THE FAILURE OF US AND EUROPEAN SANCTIONS ON RUSSIA

3/13/2020

1 Comment

 
Vince Dhimos answered a question at Quora.
 
https://www.quora.com/Why-have-the-US-and-European-sanctions-failed-so-miserably-in-Russia/answer/Vince-Dhimos
 
WHY HAVE THE US AND EUROPEAN NATIONS FAILED SO MISERABLY IN RUSSIA?
 
Vince Dhimos, Editor-in-Chief at New Silk Strategies (2016-present)
 
I recommend reading fellow Quoran Hersh Bortman’s analysis below. Then I would add the following.
 
This question is complex because there are different sanctions. The first batch was imposed by the US congress in 2014 to punish Russia for the referendum in Crimea and for allowing the peninsula to accede to the RF. The referendum was held, BTW, in accordance with UN and generally accepted international standards and was not illegal. Further it was not an annexation in that the RF did not take Crimea by force. It was, more correctly expressed, an accession.
 
I think the underlying problem with US actions is that they ignore international and national laws. In the long run, the US dooms itself in so doing.
 
The Russian people understood that they were being mistreated unjustly and they pulled together. Russia decided to impose countersanctions on Europe, which as usual, acted like the perfect US lapdog and imposed similar sanctions on Russia. To retaliate, Russia immediately embargoed farm products that had until then been imported from Europe, and then went to work growing their own food. Paradoxically, these sanctions wound up saving Russians money in the long run, and also boosted their farm output and profits. It turned out to be a boon. In fact, for fear of further sanctions, Russia boosted industrial production in all fields in a policy of import substitution. It also sold off the bulk of its US Treasuries. Meanwhile, Europe, lost money through the sanctions and, thanks to the ill treatment by the US, developed a SWIFT work-around called Instex, which enables it to directly make and receive payments to and from countries like Iran that are blacklisted by the US.
 
To save myself time, let me just jump to the latest sanctions, imposed on the Russian Nord Stream 2 pipeline to Germany.
 
The US was acting here like a bull in a china closet, ignoring all the potential consequences and, in fact, the “conservative” US was throwing aside all traditional conservative principles of fair business and trade. They slapped third party sanctions on all companies participating in this pipeline project, notably the Swiss-Dutch Allseas, which was using two specially adapted ships to lay the pipe under water. Allseas was, of course, intimidated into quitting, although the project was already at least 2/3 finished. But this didn’t stop Russia, which already had such a specially equipped ship.
 
Russsia says it will complete the project sometime this year, a few months behind schedule. But it will lose billions in lost revenues.
 
So what did Germany and the EU think about this? They were furious at the US because they need the cheap Russian gas. And they easily saw through this naked attempt to unfairly coerce Europe to buy the way overpriced US LNG – which the EU has already said it doesn’t need.
 
This predictably drove Europe closer to Russia’s court, prompting European governments to consult with Putin. Merkel, for example, flew to Moscow for a tête à tête, ostensibly to discuss the Middle East. But it was a stinging slap at Trump for his belligerent attitude toward an ally.
 
Likewise, French president Emmanuel Macron has taken bold steps toward “improving conditions of security and stability” jointly with Russia. (Emmanuel Macron’s Russian roulette — the tone of this article is typical sneering Russophobia but it is a display of naked fear).
 
At around the time the US imposed third party sanctions on the Russian pipeline project, the US was reminded of Russian success when the Russian pipeline Power of Siberia started operation supplying gas to China.
 
But the icing on the cake was when Russia took advantage of the COVID-19 crisis to abruptly announce that it would not be going along with OPEC+1’s oil production cuts designed to artificially prop up US shale oil sales. US shale is now in serious trouble.
 
I think this was Russia saying “consider that our sanction on you.”
 
1 Comment
John McClain
3/14/2020 06:00:14 pm

The funny part, is it hits exactly where the subsidies have been going, in the shale oil industry, propping up a "failed concept" with "loose money practice", at the expense of all who practice "good economics", here in America.
It's also amusing that it is being done in real world value economics, while our own "depredations" have all been performed using our "Keynesian economics" and economic electronic strangle-hold as the U.S. government weapon of choice, and we've forced Russia to become self-sufficient, abundantly productive, and willing to explore new avenues, even when thrust upon them, invariably increasing their adaptability, innovation, and decisiveness, in dealing with externally applied force.
All the while, we, regular "Americans" benefit from lower fuel prices, less money being controlled by our own "oligarchs" as they lose money in the fracking loss, and general "market failings", which must ultimately be reckoned, in the end.
Our economy has been blown out of proportion, with fake money, the world no longer has to accept it at face value, but has choices, and we rapidly begin to lose any choices of our own,
Semper Fidelis,
John McClain
GySgt, USMC, ret.
Vanceboro, NC, USA

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