Why did Putin invade Ukraine this week despite the threat of sanctions announced by the United States and Europe? The Russian president wants to restore the glory of the vast empire before Gorbachev dissolved the former USSR in the late 1990s. The explanation, given by Putin himself at dawn when he ordered the invasion, embellished with accusations of Nazism in Ukraine, is difficult to understand in Western terms. For him, the creation of the security perimeter around Russia that NATO claims it is a way to protect not only national independence, but also economic.
The European stock market fell just over ten percent so far this year until Friday, but the Russian collapsed more than a third only the day it announced its invasion. The Russians’ per capita income has sunk from €14,000 to around €9,000 a year since the Crimean War, despite the fact that the sanctions adopted in 2014 are said to have had little impact. doPutin is not afraid of new sanctionsmuch more severe than the previous ones?
The well-being of the Russians brings him to the heavein fact, as happens to Latin American dictators in the style of the Venezuelan Maduro. It has the support of more than half of the population, thanks to an oiled and agile machinery of propaganda and defamation.who will now be in charge of building a tailored suit to present him as a victim of the genocidal policy of Ukraine and the West, instead of as an aggressor.
How far can you go in your ambitious expansion? No one really believes that Ukraine will be annexed after the experience in Afghanistan.. Among other things, because it is a country of 40 million inhabitants, with an enormous size for the potential of the Russian economy.
like today pick up the Economist, Russia has a GDP of 1.3 trillion, slightly higher than ours. Lor more likely it is that he seeks a lightning action aimed at overthrowing the government of Volodomir Zelensky, with whom he is already willing to negotiate, to replace him with a puppet related to his person. What seems certain is that it will take over the republics of Donbas, Donetsk and Lugansk, of which it now only controls a third, to establish an outlet to the Black Sea.
If you achieve your goal, the next step could be the Baltic republics of Estonia, Latvia and Lithuania, together they only have six million inhabitants.
The problem is that they are members of NATO and the rest of the member states would be forced to defend them, not as is the case now with Ukraine. That is why it is important that Europe and the United States remain united and remain firm in the application of sanctions against Russia.
The package of penalties is aimed at isolating the Russian economy and its leadership as was done in Iran. But it is difficult to achieve it, at least in the short term. Putin has carefully prepared the invasion in recent years in order to resist the Western embargo.
Russia is the world’s fourth largest oil producer and second largest gas producer. Sales of fossil fuels, which represent 14 percent of its GDP (a percentage similar to the tourism sector in Spain) and 40 percent of its public income, allowed it to accumulate surpluses and reserves in foreign currency for 630,000 million dollars, according to the Council for Foreign Relations (CFR).
His economy is very open, contrary to popular belief. 46 percent of the GDP depends on the outside. Moscow has made a turn towards Beijing, where it directs 15 percent of its exports and from where one fifth of its imports already come.
The Chinese President Xi Jingping, who does not condemn the invasion of Ukraine, promised a few weeks ago to double the purchase of Russian gas through the construction of another underground tube, as well as to ensure the supply of strategic goods, especially from the technological and industrial sectors. With this, it will counteract the effect in two of the areas on which the sanctions are focused.
Germany suspended the future Nord Stream II gas pipeline, but did not dare to cut off the current gas supply channels nor financial transactions through the Swift systemfearing spillover effects on banks around the world.
western sanctions they will have a boomerang effect, because they will hurt the United States more and, above all, to Europe than to Russia. Germany will be the most affected, since it exports 30,000 million dollars to Russia, 2 percent of its foreign trade, and obtains a trade surplus of 11,000 million. A painful blow for a country, which entered a technical recession in the fourth quarter of 2021.
Putin chose a critical moment for his raid. The exit from the Covid crisis is causing tightness in global supply chains and a rise in prices, which will now increase again.
Russia is the origin of half of palladium exports, 15 percent of platinum and 4 percent of aluminum. Likewise, it is the first world producer of wheat, the fourth of oil and one of the main ones of gas.
All these raw materials became more expensive. Crude oil jumped the barrier of one hundred dollars and gas suddenly rose 50 percent in a single day, which multiplies its price by seven in the last year. Companies will have to transfer, sooner or later, the cost of transport to their customers and households, who in turn will press for wage increases that feed back inflation.
The The first reaction of the ECB and the Federal Reserve was to try to reassure the markets with a message of relaxation pressure on interest rates, expected for March in the United States and at the end of the year in Europe.
But for how long will it get. If prices continue to rise, and there are more and more reasons to believe that they will, central banks will be forced to increase the price of money to avoid a serious economic crisis.
The ECB is mandated to tighten its monetary policy if medium-term inflation exceeds two percent. A percentage that is multiplied by three in Spain, where experts predict rates above ten percent in the coming months.
The economy is heading towards stagflation low growth without inflation. A trend that is corroborated and accelerated after the escalation of tensions in Ukraine. But, fortunately, this will not happen immediately.
The ecological transition will suffer. Without Russian gas, Europe is forced to use the ships that arrive from the Middle East and the United States, because the connection with Norway is not enough.
The Iberian Peninsula, which has 8 of the 21 European regasification plants, will play a relevant role in supplying gas to the rest of Europe. In anticipation of events such as the current one, the The EU has already declared gas and nuclear as sustainable energies, which qualifies them to receive subsidies. On Europe we can see a rebirth of small nuclear power plants with which to reduce the energy consumeda, at the same time that the rush to achieve the ambitious objectives in the reduction of CO2 emissions is relaxed.
From the point of view of geostrategy, Russia’s alliance with China, the second world superpower with nearly 14 billion GDP, constitutes a real threat to the West. Some speculate that the Beijing regime could take advantage of current tensions to launch an attack and retake Taiwan.
For now, these plans are part of fiction. What is true is that the Russian invasion will contribute to the regionalization of the world economy and the end of globalization, already revealed in the mandate of former President Trump. It will resurrect the politics of blocks and la cold war born after the Cuban missile crisis in 1962.
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