Sanctions against Russia: Global Sanctions-War
https://www.rozen-bakher.com/monitoring-risks/14/03/2022
Published Date: 14 March 2022
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Monitoring Risks by Dr. Ziva Rozen-Bakher
Analysing in-Depth Security & Political Risks and Economic & Strategic Risks
Monitoring Risks https://www.rozen-bakher.com/monitoring-risks-1
Dr. Ziva Rozen-Bakher
Researcher in International Relations with a Focus on Security, Political and Economic Risks for Foreign Direct Investment (FDI) and International Trade
Russia Sanctions: Sanctions-War, 23 February 2022
U.S. and allies step up sanctions pressure on Russia over Ukraine | Reuters
Kremlin warns Americans will face financial ‘consequences’ of U.S. sanctions (msn.com)
As sanctions start, Russia's trade flow shifting towards China (msn.com)
The escalation in the Ukraine crisis leads the West to start imposing sanctions on Russia, which raises several important questions, especially regarding the potential of Global Sanctions-War:
Will the sanctions deter Russia from invading Ukraine?
If a full invasion of Ukraine takes place, will the West's sanctions against Russia lead Russia to pull back from Ukraine?
Will the West's sanctions against Russia lead to a ‘Global Sanctions-War’ between the West and the East in terms of allocating the export and import from the East coalition to the West coalition, or vice versa, from the West coalition to the East Coalition?
If Sanctions-war starts, will it lead to a military confrontation between the West and the East?
Global Sanctions-War between the West and East may reflect in reallocating the export/import from non-allies countries to allies countries, which may create two rival coalitions with the expectation that each country will trade only with its allies countries while avoiding trade with non-allies countries or even with the pressure to impose sanctions on non-allies countries. Moreover, if a country is neutral without taking a strict side between the West coalition and the East coalition, then pressure will be put on these neutral countries to choose a side between the West coalition and the East coalition. Worse, the ‘Global Sanctions-War’ between the West and the East over time has the potential to lead to WWIII, especially if the global economy enters into a lose-lose scenario.
However, in the first stage, the expectation is that the Sanction-War will occur between Russia and the West in a way that Russia will impose counter-sanctions against those countries that impose sanctions against her by reallocating the export/import of Russia to allies of Russia. Therefore, Table 1 below presents the Win/Lose of Russia in relation to each Western country that is supposed to join the sanctions against Russia. The assumption is that all NATO members and all EU members may join the sanctions against Russia at some level, so all NATO members and all EU members are included in Table 1 below, as well as the core Western countries, such as Japan. Besides, it’s possible that additional USA’s allies that aren’t included in the table may join the sanctions against Russia, such as USA’s allies from South America.
Analysis of Table 1 reveals that the maximum potential loss to Russia due to the West's sanctions is supposed to be $64 billion USD per year (based on 2020) if all countries included in Table 1 impose sanctions against Russia. However, even if Russia imposes counter-sanctions on them, the sum of $64 billion USD is equivalent to 1-2 months of exports from Russia to all countries in 2021, so it is likely that Russia may feel the vacuum of $64 billion USD per year in the short-run, as happened when the West imposed sanctions on Russia in 2014, as shown in the Charts below. More specifically, in 2014, the West imposed sanctions on Russia due to the annexation of Crimea, yet it harmed Russia only in the short-run, but later, it returned to its normal level, while after that, the export/import even increased significantly, especially since 2020, which may signal that Russia may already reallocate its trade to its core allies. That may explain why the sanctions threat against Russia does not deter Russia from declaring the independence of the two pro-Russia regions in East Ukraine and even may not deter Russia from the plan to invade Ukraine, especially if China is already providing Russia a backup of reallocating Russian trade from the West to China in case of sanctions by the West. Nevertheless, the sanctions against Russia are supposed to include not only sanctions on exports but also additional types of sanctions, such as sanctions against Russian banks and Russian individuals, but the effectiveness of these sanctions is unclear.
Table 1. Win/Lose of Russia in relation to Each Western country that is Supposed to Join the Sanctions against Russia (source: Trading Economics)
Previous Relevant Analyses from Monitoring Risks by Dr. Ziva Rozen-Bakher
Monitoring Risks by Dr. Ziva Rozen-Bakher, 7 February 2022, Russia’s Counter-Sanctions: ‘Gazprom-Weapon’ https://www.rozen-bakher.com/monitoring-risks/07/02/2022
Monitoring Risks by Dr. Ziva Rozen-Bakher, 3 February 2022, Sanctions against Iran and Shanghai Cooperation Organisation (SCO) https://www.rozen-bakher.com/monitoring-risks/03/02/2022
Monitoring Risks by Dr. Ziva Rozen-Bakher, 2 February 2022, Ukraine-Russia Crisis https://www.rozen-bakher.com/monitoring-risks/02/02/2022
