The sanctions come as G7 leaders are preparing to gather soon in Italy for a summit where the top priorities will be boosting support for Ukraine and grinding down Russia’s war machine.
Archived version: https://archive.ph/qrIbC
The instant Russia attempted to invade Ukraine they began to lose. This graph is all I need to see to know what’s happening.
It might look not great at first look, but when you think about it, the same sanctions prevent them from using USD. So they are forced to trade in other currencies, which negates all the harm. Like trade with China in yuan or India in yuan (they used to use rupees, but it’s also a weak currency).
I wanted to know if this claim that all harm is negated, if trade occurs in other currencies is true. I have no clue how currencies really work on a global scale, so I looked up an exchange chart.
To me, it looks like it is similar, just on a different scale. Can you explain what you mean, i.e. am I reading this wrong and how do I read it right?
They are not exchanging yuan into rubles. They are using their yuan reserves to buy from China/India and China/India is paying them in yuans for oil and gas, so they are getting restocked without need for exchange. Which has double benefit for China, since it’s strengthening their currency and giving them very cheap below market value goods. They are theoretically losing cash since if they were able to sell at full market price they would get 4 times that, but it’s not significant enough to hurt them too much. But that might change soon, since Russia is trying to make China pay full price without having any leverage.
The sanctions would have worked if they had nobody to trade with, but China/India won’t pass an opportunity for cheap oil/gas, which they desperately require for their growth. Russia also have the 4th largest currency reserves in the world just for such occasion. Putin might be a war criminal, but he’s not stupid.
It did have an impact on every day Russians, but even that Russia tried to minimize by keeping interest rates low at the start of the war/sanctions and strictly controlling the exchange of rubles into any other currency. Only now they increased them to stop bleeding cash, even if they can sustain it for longer.
But all of that can change on a dime, geopolitics is a hot mess. US trying to make friends with India now, so they maybe decide to pressure them to stop buying from Russia or China might get offended by recent Russia’s demands for higher price and tries to put them in their place. Who the fuck knows.
Which sucks in a different way because India’s government has been steadily drifting towards some very popular fascism.
Ah okay that makes sense, thanks for explaining!
Oh no! Anyway.
Is their economy actually failing? Last I heard, it’s doing better than anticipated with the sanctions.
I’s not as bad as some western media reported, but it’s not great. They aggressively used their cash reserves and low interest rates to combat the sanctions, so it looked that they were immune, but it’s catching up to them now with interest rates at 16%. And while they were able to circumvent the sanctions with aid of India and China, they were forced to sell their oil & gas for cheap, while OPEC cartel raised the global price. Now Russia wants to make China make them pay full price, but they have no way to demand it if they want any revenue at all.
They held 8.5 to 9.5 range for just about 1 year. Before and after it was 16-20% range.
Source: https://base.garant.ru/10180094/
That’s because they started a war economy, where the Kremlin finances lots of companies, which looks good on an economic sheet, but it’s only to make stuff getting used up in the war not to benefit russia itself which is disastrous for the long term russian economy.
Imagine when the war is over, and tons of people are no longer working for russia but for a now defunded war machine…
There are valid concerns of economic overheating from huge internal investments.
Russia is experiencing standard consequences of rapid economic expansion: salaries are rising up, labor market is constrained.
One negative point is high interest rates, which are held high to slow down economic expansion.
Sanctions have impact, but the impact is falling very far from expectations.
That’ll learn us
Chinese currency took 53.6% of all Russian trade in May of this year.
Compare this with just 1% 2 and a half years ago in the beginning of 2022.
Russian financial system is already prepared for this scenario and absolutely no serious impact is expected to occur.
These events (sanctions and switch in trade) will simply accelerate transition of Russian economy away from dollar in the trade.
Russia and China already use each other’s currency to settle trade between each other. World manufacturing and world resource store are now exclusively connected and now fully control internal inflationary pressures.
EU and US are not able to control price inflation and are forced to guard their economies through additional tariffs. For example, recent introduction of tariffs on Chinese made electric cars demonstrates loss of competitiveness of western economies. Cars are complex products that require a lot of energy to produce. As a result they are a good subject to aggregate economic efficiency.
if this continues China and Russia may be able to dictate the rate of currency inflation in the non-dollar space (read BRICS future currency control).
dollars that used to work inside Russia-China trade space are continuing to get pushed out into the dollar space and causing upward inflationary pressure on the dollar. This forces US Fed to keep pumping freed up dollars from the dollar system through elevated interest rates to keep inflation down in the dollar space.
There are 1st signs of economic slowdown in US and fed is currently unable to react quickly due to the need to pump excess liquidity from the dollar system.
So, all this impact on the dollar for a questionable impact on Russia.
