Update on the Russian-Ukrainian conflict
In the emerging world order, there are three players: the United States, China and Russia. Indeed, the United States is a superpower with the strongest economy.
But the size of the Russian economy is $1.71 trillion while China’s is $19.9 trillion. With this, Russia is ranked number 11 while China is the second largest economy.
These figures suggest that it is difficult for the United States to corner China with war tactics, but Russia being economically less powerful than China can easily be targeted.
Therefore, the United States proposed a “bleeding Russia” policy. Here the question is how can the United States bleed Russia?
To better understand this conflict, we must stick to a few historical facts because the question of the invasion of Ukraine is not an abrupt measure; he brings a long story from the Berlin Wall in 1989, where the parties involved reached an agreement that NATO would not expand to Russia’s eastern border.
Ukraine’s NATO membership is seen as a direct violation of the earlier agreement which Russia has defined as a red line and a threat to its national security.
Therefore, Russian concerns had been clear to the West since 1989. So why was NATO so determined to expand?
NATO expansion was supposed to provoke Russia and in February 2022 Russia was forced to invade Ukraine.
Although Russia continued to prefer to resolve the issue through negotiations. But it seemed that the West was the least interested in the negotiations, because the negotiations ran counter to the goals of the US policy of bleeding Russia.
After the invasion, Russia faced serious sanctions from the United States and its NATO allies. In six rounds, more than 4,000 sanctions were imposed due to which Russia faced growing isolation in the global world.
It looks like this is not a war between Ukraine and Russia, but an economic and financial war against Russia by the United States via NATO.
The main objective is to financially isolate Russia. Initially, the Russian banking sector was deeply affected by the removal of the SWIFT facility.
But how effective were these sanctions? Trade deals face crippling consequences with an oil and gas ban by the United States and its European allies.
Main destination of Russia’s energy exports in 2021 for crude oil and condensates: OECD Europe 49%, Asia and Oceania 38% while the rest of the world 13%.
For natural gas OECD Europe 74%, Asia and Oceania 13% while the rest of the world 13%. The figures above suggest that Europe depends on Russia for its energy needs.
This is one of the main reasons why Europe has not yet implemented a complete ban on Russian gas exports.
They need an alternative way to completely ban Russian gas. But unfortunately, these alternative means such as: a) the United States will provide an additional 15 billion cubic meters of gas by the end of 2022, but this will only be enough for 1/10th of Europe’s needs; b) the United States could supply 50 billion cubic meters of gas by 2030, which takes time; c) using other renewable sources such as wind energy in Europe takes time.
But do Europeans have so long to wait for alternative energy sources? The simple answer is no.
The story is not limited to Europe alone, many countries are dependent on Russian gas such as North Macedonia 100%, Bosnia and Herzegovina 100%, Finland 90%, Latvia 90%, Bulgaria 90%, Serbia 89%, Poland 53%, Italy 46%, Germany 43%, France 25%, Belarus 19%, Turkey 16% etc.
World oil prices are currently hovering between $105 and $112 a barrel. The United States has asked its allies to release an additional 30 to 50 million barrels to the market.
But that’s not in the best interests of OPEC Plus. Therefore, they never agreed. In desperation, the United States eased oil sanctions against Venezuela, but with the easing of sanctions, Venezuela largely began selling oil to China.
Unfortunately, the cost of NATO expansion to Russia’s eastern border is more deadly and expensive not only for Ukraine but for the whole world.
In times to come, the world will face energy, food and humanitarian crises. The energy issue is ringing alarm bells for many countries – in this global environment, can the world afford to continue this war?
Otherwise why this war? If they aimed to weaken the rouble, instead of weakening, it strengthened.
Russia’s account surplus hit $58.2 billion in the first quarter (January-March) of 2022. This is a three-decade high, up from $22.5 billion in the same period last year.
As Russian exports plunged, the ruble soared. But how ? The American objective was to weaken the Russian economy and, ultimately, its national security.
But, (according to Dr. Ashfaque Hassan Khan’s lecture), Russia took the following steps to retaliate:
(i) The Central Bank of Russia injected $1.0 billion into the market on the day of the invasion to support its currency.
(ii) The Central Bank raised its benchmark interest rate from 9.5% to 20% in February 2022.
(iii) Set a foreign currency withdrawal limit.
(iv) Capital controls imposed and complete ban on foreigners selling securities.
(v). Prohibition of transferring foreign currencies abroad.
(vi). The Central Bank announced the purchase of gold at a fixed price of 5,000 rubles per gram.
(vii). Hostile countries were asked to pay in rubles for oil and gas.
(viii) Russian exporters were invited to earn foreign currency and convert up to 80% into roubles. As a result, the ruble strengthened. On February 24, 2022, the ruble-dollar parity was 79.7 per dollar.
Two weeks after the invasion, the ruble fell to 151 to the dollar. Which created a huge panic, but Russia came up with the above plan to regain Ruble strength.
Currently, 54 ruble is per USD much stronger than before. Second, the US goal seems unattainable.
However, the conflict has left Ukraine with 60% damaged infrastructure, 20% of its territory under Russian control, 12 million displaced people and 6 million refugees.
The impact of the Ukraine-Russia crisis has also affected Europe and the world with energy shortages, emerging food crises and humanitarian problems.
But is this war worth the cost to all states, especially what Ukrainian citizens are paying?
Unfortunately, this war seems to be another mistake of the West after its precipitous withdrawal from Afghanistan, leaving behind a humanitarian crisis.
The Ukraine-Russia war leads to reshaping world politics with the emergence of a new world order.
—The author is Assistant Professor, Department of Government and Public Policy, School of Social Sciences and Humanities, National University of Science and Technology.