Sanctions on the two ends: who made Europe worse | Latest news The Moscow Post
25 May 2022

Sanctions on the two ends: who made Europe worse

The United States and Western allies, in fact, announced sanctions on their own, imposing "carpet" restrictions on Russia.

For three decades, Moscow and Kiev went to a situation that forced the Kremlin to decide on a special operation to demilitarize and denazify Ukraine. In total, during a special operation by the forces of the DPR and LPR, 2,396 military infrastructure facilities of Ukraine were destroyed, the correspondent of The Moscow Post reports.

US plans crack at seams

The Ukraine Not Russia project in its American interpretation moved sharply in the weeks of Euro Maidan and after 2014. The West encouraged the anti-Russian policy of the Kiev authorities, ignored the growth of neo-Nazism, and the Armed Forces strengthened and armed. There was a threat of creating NATO bases in Ukraine. To this must be added what the Russian president called the "nuclear and missile competencies" that have remained at the disposal of Kiev since Soviet times.

"Now they are talking about acquiring nuclear status. That is, to acquire nuclear weapons. We can't get past things like this. Moreover, we know how this so-called West behaves in relation to Russia, "said Vladimir Putin, stressing that nuclear ambitions pose a special threat to Russia's security.

The Russian military also discovered 30 bio-laboratories in Ukraine for the production of possibly bio-weapons, said Igor Kirillov, head of the radiation, chemical and biological defense of the Armed Forces. According to him, the customer of the work is the corresponding department of the US Department of Defense. The Pentagon-affiliated multidisciplinary company Black and Veatch participated in the implementation of the projects.

Even a nuclear-free, but de facto NATO-affiliated Ukraine would threaten Russia's security from Baltiysk in the west to the borders of the Ural Federal District in the east. The threat would also come for Belarus, Transnistria, Donbass, as well as Crimea and Sevastopol.

The meaning of the existence of the current leadership of Ukraine was its hostility to Moscow. The post-Soviet republic actually came under external control, turned into a "territory of serious security threat," as one of the Russian departments formulated it.

As a base of neo-Nazis and Bandera, supported by the authorities, Ukraine began to pose a terrorist threat to neighboring countries. It came to the infiltration of foreign mercenaries and international terrorists into its territory. National battalions are like Middle Eastern extremists, use the population in cities as a human shield. A special military operation also gradually neutralizes this threat.

In the zone of special danger were the Donetsk and Lugansk people's republics bordering the Russian Federation, their population, economy, infrastructure. The process of liberating Donbass from the Armed Forces of Ukraine and neo-Nazi units is coming to an end. At times, humanitarian corridors from Mariupol and Volnovakha open, but their real work to evacuate the civilian population depends on the Armed Forces of Ukraine and the National Baths.

In addition, Moscow preempted Kiev. The Armed Forces of Ukraine were preparing an attack on the Donbass and, possibly, Crimea. According to the head of the DPR Denis Pushilin, the start of the operation was scheduled for March 8.

At the same time, a solution to the status of Pridnestrovie can be found. The leadership of the enclave proposes to end one of the most protracted conflicts in Eastern Europe and has asked the UN, OSCE and the "international community" for recognition in this regard. Moscow supported this proposal.

"Carpet" sanctions, and new-old allies

Russia cannot be forgiven for swinging the world order into which it is, as it were, economically embedded. Some embassies, consulates, missions are blocked. A regime of severe restrictions has been introduced, accompanied by the blocking of part of Russian foreign exchange reserves. The ruble is under powerful pressure. Hence the government's decision to sell 80% of export revenue and the restriction on the withdrawal of foreign currency abroad.

Foreign companies suspend or close their enterprises in Russia, and some observers say that they say this "they clean the market for us."

In the face of Western sanctions aggression, the Russian government will direct oil and gas excess profits for the development of the domestic economy, for the payment of benefits, military pensions, other obligations, for anti-crisis measures and priority economic projects, as well as the repayment of public debt. In 2014, the Central Bank created the SPFS financial messaging system, which became an alternative to SWIFT.

Changes in the Budget Code of the Russian Federation will allow you to respond flexibly to changes in the situation in the economy. Under the current budget rule, excess carbon earnings are credited to the National Wealth Fund (NWF) through a mechanism for buying currency on the domestic market. Blocking part of the Bank of Russia's foreign exchange reserves (part of them are NWF liquidity) The Ministry of Finance lost the opportunity to buy anything other than the Chinese yuan and gold in the reserve. Relations between Moscow and Beijing in this context can become closer and more meaningful.

Russia will have to get rid of imposed treaties, agreements, obligations to international organizations and other countries that worked not for the benefit of the economy. The volume of money supply in the economy will no longer depend on foreign exchange revenues. Russia must regain sovereignty and develop its own investment contour, which does not depend on foreign investment. One of the measures should be a complete ban on offshore for public and private companies.

The government also talks about the redemption of securities booms of domestic issuers. The Central Bank has changed the requirements for them to maintain the existing level of listing. Among the measures is the elimination of the requirement for the mandatory presence of independent directors, the necessary level of shares in free float, the necessary level of credit rating. These measures should support the stock market of the Russian Federation.

Who are you? To myself

Sanctions aimed at weakening the Russian economy may become a problem for the EU.

On the London Stock Exchange, the securities of Russian companies depreciated. The main European sites are also reacting. The German DAX index as of March 7 lost compared to the recent maximum values ​ ​ of 21%, the French CAC 40 - about 18%, the Hong Kong Hang Seng rolled back 24%. Banks, whose shares collapsed, suffered the most. Brent's oil price rose to $139/barrel. As of 12:50, the price of April futures at the TTF hub in the Netherlands, the price of natural gas rose to $3,899 per 1 thousand cubic meters.

The West will have to pay high costs. The European airlines will suffer losses in view of increase in prices for aviation fuel and also as a result of lengthening of routes to Asia in flight of the territory of the Russian Federation. Rising oil prices will increase inflation, which has already jumped in a significant part of the Western world. It is reported that Germany, together with partners, is considering various options for influencing the Russian Federation, but does not consider it necessary to proactively refuse to supply Russian energy resources.

The Russian Federation remains the leader in the world wheat market. Wheat futures on the Chicago Commodity Exchange, delivered in May, rose 7% or to $330 per ton ($9 per bushel, 27.22 kg). Russia and Ukraine account for about 30% of global wheat exports. In November 2016, a ton of wheat cost 113 euros, in April 2021 the price reached 165 euros, now it is 278 euros.

Gold is becoming more expensive as a protective asset. The price of metal increased by more than 10% compared to the indicators of the first week of January. The value of palladium during a trading session on the Comex exchange (included in the CME Group) on Monday updated the historical maximum, rising above $3,400 per troy ounce.

Aluminum and copper during trading on the London Metal Exchange (LME) also updated historical highs. Aluminum rose to $4026 per ton. Copper rose in price to $10,845 per ton. Nickel futures are leading, adding more than 25% and trading at $36,615 per ton.

In Russia, the bulk of the production of the above metals is concentrated - MMC Norilsk Nickel, which is the world's largest producer of nickel and palladium with a share of 22% and 44%, respectively. Norilsk Nickel's share is noticeable in the markets of platinum (15%), cobalt (14%), rhodium (12%) and copper (2%).

The sanctions pressure of Russia, in the words of the Russian president, is "akin to a declaration of war," can undermine confidence in the EU financial market, negatively affect energy security. The business reputation of a number of states has been damaged, countries should think twice about the safety of their reserves abroad.

Banks operating in Russia owe $134 billion to foreign institutions. Internally, 80% of ruble government bonds are stored, their total amount is 15.5 trillion rubles. European banks, including the Hungarian OTP, the Austrian Raiffeisen, the French Société Générale and the Italian UniCredit, account for a large volume of transactions with Russia and Ukraine.

Into a new world, but not alone

Washington could not form an anti-Russian coalition, as planned. Among the 35 countries that abstained in the UN vote are China and India. Countries and territories that introduced or joined sanctions against Russia after the start of a special military operation of the Russian Armed Forces in Ukraine were included in the list approved under the decree of the President of the Russian Federation of March 5, 2022 "On the temporary procedure for fulfilling obligations to some foreign creditors."

According to the decree, Russian citizens and companies, the state itself, its regions and municipalities that have foreign currency obligations to foreign creditors from the list of unfriendly countries, will be able to pay them in rubles at the Central Bank rate on the day of payment, the government said. The new temporary procedure applies to payments exceeding 10 million rubles per month (or a similar amount in currency equivalent).

The list included the USA and Canada, the states of the European Union, Great Britain (including Jersey, Anguilla, the British Virgin Islands, Gibraltar), Ukraine, Montenegro, Switzerland, Albania, Andorra, Iceland, Liechtenstein, Monaco, Norway, San Marino, Northern Macedonia and also Japan, South Korea, Australia, Micronesia, New Zealand, Singapore and Taiwan (it is considered the territory of China, but since 1949 is operated by own administration).

The Chinese leadership welcomes direct negotiations between Kiev and Moscow, plans to play a constructive role in the settlement. This statement was made by Chinese Foreign Minister Wang I. The head of the Chinese diplomatic mission emphasized that Russian-Chinese relations differ in their independence, are based on the principles of non-aligned to alliances and non-confrontations, are not directed against third parties, are free from interference or disagreements provoked by a third country. These principles are the result of the lessons that countries have learned from the history of relations. Wang Yi emphasized that the PRC and the Russian Federation oppose the mentality of the Cold War, as well as the confrontation on the basis of ideology.

The head of the committee on the regulation of banking and insurance activities of China, Guo Shuqing, said that the country does not intend to join the sanctions imposed by Western countries against Russia, will maintain normal trade, economic and financial ties. Trade Minister Wang Wentao said Beijing is trying to maintain normal trade with Russia and Ukraine. The chairman of the Chinese Commission for the Regulation of Banks and Insurance noted that Beijing will not participate in the sanctions.

Last year, the volume of Russian-Chinese trade increased by 35.8% compared to the previous year, reaching a record level of $146.9 billion. More than a third of trade is accounted for by energy resources. Agricultural exports from the Russian Federation to China in 2021 amounted to $3.5 billion and will grow. The parties set a goal by 2025 to bring the volume of trade to $250 billion. According to the results of the first two months of 2022, trade grew by 38.5% and amounted to $26.4 billion.

The South China Morning Post (Hong Kong) recalls that Beijing did not support Western sanctions against Moscow and shares hostility towards the international system led by the United States. It is also reported that as part of events dedicated to the 50th anniversary of the signing of the Shanghai communiqué between China and the United States, a former senior American official warned that relations between Beijing and Washington could deteriorate if China does not change its position on Ukraine.

The Chinese edition of the Global Times writes in this regard that the United States miscalculated when imposing another sanctions against Russia. Notes that Washington is trying to damage the Russian defense industry, but this part of the Russian industry does not depend on Western technologies. Moreover, Russian military products are actually proving their effectiveness and becoming attractive to many countries.

Photo: Odd Andersen/AFP, Observer

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