Guardian: “Putin will win and sooner or later an agreement will be reached”

The British Guardian is certainly not a “pro-Russian newspaper” and does not support Putin. In the language of the so-called domestic “democrats”, Guardian journalists are not “cheap corrupt women” …

Article signed by Larry Elliott, financial editor Guardiansimply lists and analyzes the facts.

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It has been three months since the West launched its economic war against Russia, which is not going according to plan. On the contrary, things are going very badly.

Sanctions were imposed on Vladimir Putin not because they were considered the best option, but because they were better than the other two options available: do nothing or go to war.

The first package of economic measures was introduced immediately after the invasion, when Ukraine had to capitulate within a few days. This did not happen, with the result that the sanctions, although incomplete, were gradually tightened.

However, there are no immediate indications of a Russian withdrawal from Ukraine, which is not surprising since the sanctions have had the distorted effect of increasing Russia’s export costs for oil and gas, greatly increasing its trade balance and financing its war effort. In the first four months of 2022, Putin boasted a current trade surplus of $96 billion, more than three times that of the same period in 2021.

When earlier this week EU announced its partial ban on Russian oil exports, the price of crude oil on world markets jumped, bringing another unexpected economic benefit to the Kremlin. It is not difficult for Russia to find alternative markets for its energy carriers: oil and gas exports to China rose more than 50% year-on-year in April.

This does not mean that sanctions are painless for Russia. The International Monetary Fund estimates that the economy will shrink by 8.5% this year due to reduced imports from the West. Russia has stockpiles of goods needed to support its economy, but they will run out over time.

But Europe is slowly being weaned off dependence on Russian energy, allowing Putin to avoid an immediate economic crisis. The ruble – thanks to capital controls and a positive trade balance – is strong. The Kremlin has time to find alternative sources of parts and components from countries ready to circumvent Western sanctions.

When the global players met in Davos last week, the public message was condemnation of Russian aggression and a renewed commitment to firmly support Ukraine. But privately there were concerns about the financial cost of a protracted war.

These concerns are entirely justified. Russia’s invasion of Ukraine has given additional impetus to the already strong price pressure. The UK’s annual inflation rate is 9%, the highest in 40 years, gasoline prices are at record highs and the energy price ceiling is expected to rise by 700-800 a year in October. Rishi Sunak’s latest support package to tackle the cost-of-living crisis was the chancellor’s third in four months, and there will be more this year.

As a result of the war, Western economies faced a period of slow or negative growth and rising inflation—a return to the stagnant inflation of the 1970s and higher interest rates. Unemployment is expected to rise. Other European countries are facing the same problems, if not more, as most of them are more dependent on Russian gas from the UK.

The challenges facing the world’s poorest countries are of varying severity. For some of them, the problem is not stagnant inflation, but famine resulting from a blockade of wheat supplies from Ukraine’s Black Sea ports.

As David Beasley, executive director of the World Food Program, said: “Ukrainian granaries are now full. At the same time, 44 million people around the world are starving.”

Fears of a humanitarian catastrophe are growing in all multilateral organizations – the IMF, the World Bank, the World Trade Organization and the UN. The position is simple: developing countries face a triple conflict in which fuel and food crises cause economic crises. Faced with the choice of feeding their populations or paying off international creditors, governments will choose the former. Sri Lanka was the first country to go bankrupt after the Russian invasion, but it is unlikely to be the last. The world seems closer to a full blown debt crisis than at any time since the 1990s.

Putin is rightly condemned for using food as a weapon, but his willingness to do so should come as no surprise. From the very beginning, the Russian president has been playing a long game, waiting for the collapse of the international coalition against him. The Kremlin believes that Russia’s “threshold” of economic pain is higher than that of the West, and it probably is.

If proof is needed that sanctions won’t work, then President Joe Biden’s decision to supply Ukraine with advanced missile systems provides it. It is hoped that modern US military technology will do what so far has not been achieved by blocking the supply of energy and seizing Russian assets: force Putin to withdraw his troops.

Putin’s total defeat on the battlefield is one way to end the war, although it doesn’t seem that likely in its current form. Other effects are also possible. First, the economic embargo will finally work, and ever-tougher sanctions will force Russia to back down. Another thing is a peace agreement.

Putin is not going to give up unconditionally, and the potential for serious collateral damage from economic warfare is clear: falling living standards in developed countries, famine, food riots, and debt crises in developing countries.

The atrocities committed by the Russian forces mean that a compromise with the Kremlin is difficult at the moment, but the economic reality says only one thing: sooner or later an agreement will be reached.

The opinion of the author may not coincide with the opinion of the editors.



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