Sanctions against Russia don’t work: they create new markets

2023-09-22 01:00:45

In the following article from the Mishtalk publication, it is demonstrated how international sanctions often have unexpected effects, creating new markets and incentivizing unexpected economic activity. Simply this type of political actions by Western countries often do not correspond to the interests of other nations and this can lead to constantly evolving geopolitical dynamics and divisions that are no longer ‘governable’:

Lesson of the day: Sanctions don’t work because they create new markets

Foreign Policy: “Since Russia invaded Ukraine, Greece’s powerful shipping sector has continued to make big bucks shipping Russian oil. But Greek shipowners have discovered an apparently even more lucrative source of income: selling the ships themselves to mysterious buyers linked to Russia. One publication has declared that a ‘Great Greek Ship Sale’ is taking place and no price appears to be too high for a second-hand tanker. However, the once-Greek ships are entering a Hades-like shadow economy.”

Sanctions against Russia were intended to halt trade and force Vladimir Putin to make a breakthrough on Ukraine. Instead, Russia continues to take its time in Ukraine, and Russian oil in particular continues to flow into world markets. The buyers may have changed, as well as the functioning of the markets. What was transparent before suddenly became opaque.

Greek shipping oligarchs made lots of cash shipping Russian oil. Now they’re selling their ships to Putin for top Dollar. The EU must stop this. Tanker sales need to be prohibited and the G7 cap must be lowered to $50. Big thanks to ⁦@elisabethbraw⁩.

— Robin Brooks (@RobinBrooksIIF) September 18, 2023

The West has not completely isolated itself from Russia despite all the rhetoric. Western companies and banks continue to operate in Russia, although their numbers have decreased. Russian gas continues to flow into Europe, albeit at significantly reduced volumes, and may even increase thanks to a recent agreement between Bulgaria and Turkey.

Elisabeth Braw, writing for Foreign Policy, has an interesting story about how Greek shipowners made fortunes selling their used oil tankers. Since the start of the war in Ukraine, Greece has sold 290 ships. They are not sold at discounted prices. On the contrary, history provides examples where the price of ships doubled or tripled compared to the original price paid by the Greek owners. In markets like these, where money is no limit, oil tankers are highly desired items that cause prices to rise. A whole new tanker economy was born as a result of the war.

Buyers are much more mysterious than sellers. UAE-based companies purchased the most tankers, followed by buyers in China, Turkey and India. In 2022, as many as 864 new shipping companies with an association or connection to Russia emerged, according to S&P Global Market Intelligence. Sometimes there isn’t even an email address linked to these companies. The UAE’s role is not surprising, as Dubai has emerged as the new Geneva for Russian oil trading firms. China and India have both increased their imports of Russian oil and need tankers for transportation.

The UAE’s role is not surprising, as Dubai has emerged as the new Geneva for Russian oil trading firms. China and India have both increased their imports of Russian oil and need tankers for transportation.

Lesson Number Two

Countries, political leaders and market advocates act in their best interests.

It is in the best interests of Greek ship owners to sell ships, so they do it. It is in India and China’s best interests to buy Russian oil and Greek ships, so they do it.

It is in the best interests of Dubai brokers to create a ship market, so they do it.

This boils down to one simple observation: It’s in the best interests of middlemen in Greece, Russia, India, China and Dubai to tell Biden to go to hell, so they do.

Trump and Biden’s failed policy

Both Trump and Biden pretend that they can set policies for the entire world. The rest of the world is tired of it.

The interests of the United States do not coincide with those of much of the world. Since the United States doesn’t care one bit about anyone else’s opinion, why should anyone else care about the United States’ opinion?

Sure, the US can intimidate smaller nations, even if it doesn’t work (because it doesn’t work). US foreign policy has failed or, even worse, failed in Iran, Iraq, Libya, Cuba, Afghanistan, Venezuela, even Ukraine.

There should be no apologies for Putin, but one should also admit that US foreign policy played a huge role in inciting chaos in Ukraine.

Now the United States is discovering that it cannot intimidate larger nations at all. India, China, Russia and Brazil have had enough.

The BRICS enter

The world is tired of leaders like Trump and Biden, who both believe they can establish sanctions policies for the globe. But SWIFT, the dollar routing system for imposing sanctions, is reaching a dead end.

The BRICS countries will not challenge the US dollar. Throw this idea in the trash. Instead, the BRICS’ greatest success will be to avoid sanctions.

To discuss this, see What would it take for a BRIC-based currency to succeed?

One measure of “success” would be use as a reserve currency in a significant percentage of global trade.

A second measure of “success” involves avoiding sanctions. The second measure is much more likely to be successful for many reasons.

We are already starting to see a growing sanctions avoidance movement. And once central bank digital currencies can bypass the SWIFT system, the very idea that the United States can dictate global foreign policy via sanctions is headed straight for the abyss, frankly where it deserves to be.

If the United States had just minded its own business from the beginning, the supposed need for many of these sanctions would never have arisen.

Meanwhile, economists are still crying out for more sanctions. All they will do is create more innovative ways to avoid them.

Original source: mishtalk.com

To all this reasoning – which is more than acceptable – I would add the human component. When analyzing the complex panorama of international sanctions and their effects, we cannot ignore the human dimension. A people, regardless of sanctions, can resist and not bow to external pressures.
This raises important questions about the very nature of sanctions and the meaning of humanity in a geopolitical context. Unless the sanction is just a punishment in itself. But even in this case, ‘democratic’ countries should clarify what a man is for them. And what place does it have in their so-called ‘values’.