LONDON – In the five weeks since Russia annexed Ukraine, the United States, the European Union and its allies have embarked on a financial crisis that has barred Russia from gaining billions of dollars and shutting down much of its global trade. . More than 1,000 companies, organizations and individuals, including members of President Vladimir V. Putin, have been allowed to stop disrupting the economy.
But Putin reminded the nation last week that he had his own weapons of mass destruction.
Through a series of brutal measures that the Russian government and its central bank, the ruble, which lost about half of its value, swerved back to where it had not yet started the attack.
And then there was the threat of a natural gas leak from Russia to Europe – sparked by Mr. Putin says 48 “non-aligned countries” have violated their sanctions and paid for natural gas in rubles. It sent leaders to the major cities of Germany, Italy and other allied countries to run and show in the most visible way since the war began as they needed Russian power to strengthen their economy.
It was this reliance that led the United States and Europe to refrain from buying oil on the strict sanctions imposed on Russia at the start of the war. The European Union receives 40 percent of its gas and one-fourth of its oil from Russia. Reducing one day to the next, German Chancellor Olaf Scholz warned last week that “our country and the whole of Europe are in crisis.”
So far, it appears that the prospect of a gas suspension has been dashed. But Putin’s sudden demand for rubles helped Germany and Austria prepare their citizens for what might happen. Having taken part in the distribution, Berlin is launching a “first warning” in preparation for a gas disaster.
Although President Biden has announced plans to remove 180 million oil barrels from US oil reserves in the next six months and divert more natural gas to Europe, this will not be enough to change all that Russia has to offer. Oil exports to Russia typically represent more than one in 10 barrels that the world consumes.
Ongoing electricity purchases in Europe send $ 850 million daily to Russian reserves, according to Bruegel, a Brussels financial institution. The money helps Russia pay for its military spending and undermines the effects of sanctions. As a result of rising electricity prices, gas supplies from Gazprom, Russia’s largest giant, contributed $ 9.3 billion to the world economy in March alone, according to estimates by Oxford Economics, a global consulting firm.
“The Western theory is that the efficiency of financial sanctions can continue without trade sanctions,” the company said in a survey.
Mr. Challenges Putin and the jabs – sometime last week vowed to stop and continue to extort gas in the same words – have also made European leaders unstable as they try to articulate his ideas and goals.
The war has pushed democracies from relying on Russia for export. They have decided to reduce their natural gas by two-thirds in the coming winter and will do so by 2027. These targets could be very ambitious, experts say.
In any case, the transition to other vendors and ultimately to more powerful sources will be costly and painful. Overall, Europeans could be poor and cold for several years because of rising prices and declining economic activity due to a lack of electricity.
And unlike in Russia, governments in those countries should be accountable to the voters.
“Putin has already shown that he is willing to sacrifice ordinary people – his and the Ukrainian – for success,” said Meg Jacobs, a historian at Princeton University. For European democracies, rejecting thermostats, slowing down and slowing down is a choice, he said. “It works in partnership with a lot of people.”
But energy, like gas, is a small source. And Mr. Putin’s willingness to use it now means he will have less in the future. There can be no easy change in Russia. Many analysts believe that Europe’s aggressive measures to reduce Russia’s reliance on power will have far-reaching consequences.
“It’s over with Russian gas,” David L. Goldwyn, who served as a special envoy for the State Department on power in the Obama administration, said in Europe. “I think that even after the war, and even if you have a new government in Russia, I think there is no going back.”
The president of the European Commission, Ursula von der Leyen, made the same statement when he announced the new electronic system last month: “We cannot rely on the seller who threatens us in detail.”
Security concerns are not the only thing that has tarnished Russia’s reputation as a long-term powerhouse. What seemed strange to economists, lawyers and lawmakers about Putin’s demands to be paid in rubles and that it would have violated the sacred pact had been negotiated and revealed Russia’s desire to become an unreliable business partner.
As they try to use their foreign power, Putin has taken steps to protect Russia’s economy from being plagued by sanctions and to support the ruble. Few things can harm the world as a whole if money suddenly falls apart.
Russia-Ukraine War and Global Economy
Allied parties shut down Russia’s central bank and sent the ruble down, the bank raised interest rates by up to 20 percent, while the government ordered companies to change 80 percent of the dollar, euros and other foreign exchange earnings. in rubles to increase demand and raise the price.
This has also revived the value of the ruble, but as several experts have pointed out, the new financial stability has come not only because the market suddenly gained confidence in the Russian economy but also because of the government’s amazing performance.
Putin’s demand for gas in rubles seems to be one of them. However, the insistence was surprising. Russia can easily take euros and dollars paid by foreign governments and convert them into rubles.
Putin, perhaps, could be happy to put European governments in a precarious position or change their power, but what he wants could also prove to be a crisis at home.
For example, he may not be able to guarantee that his company, including gas company Gazprom, will pay back 80 percent of the dollars and euros it earns and sells to Russian banks.
The problem is that “the government cannot enforce the law,” said Michael S. Bernstam, a researcher at Hoover Institution at Stanford University. “Companies are stealing.”
“The only people the Russian government can trust are western companies that buy Russian natural gas and other commodities,” he added.
Apart from the financial crisis, Russia is struggling with the economy in other ways as well.
The country is already facing an economic crisis, with several analysts estimating that the economy could fall by 20 percent this year. A S&P Global survey of consumer managers in Russian manufacturing companies showed significant reductions in manufacturing, new jobs and systems in March, as well as higher inflation.
A few weeks later, Putin disrupted trade and trade relations between Russia and rich countries that took years to build after the fall of the Soviet Union. According to one study, about 500 foreign companies have begun to increase their prices in Russia, cutting back on employment and financing, or promising to do so.
“Russia does not have the potential to adopt the expertise it would have acquired from the other side,” according to a study by Capital Economics, a London-based research group. This is not a good sign to increase productivity, which even before the war, was 35 to 40 percent in the United States.
As a result, even though the war in Ukraine ends, Russia will be more economically isolated than it has been in decades, reducing any current world economic opportunities and economic prospects.