Slamming the Door behind Them.

Foundering Fortunes in the Future?

Preamble.

With Russia launching its Special Operation in the Ukraine, both western governments and companies have been quick to sever all ties with the Russian Federation. For all the western claims that ‘Russia is a gas station of a country’, Moscow is not only a very important export customer for a huge volume of goods, but also a supplier of a number of critical materials, some of these being of great importance to the West as a whole. This article will be looking at how the West has shot itself in the foot by walking out on Russia.

A well-oiled Exporter.

No article concerning Russian exports would be complete without looking at the fossil fuels it exports to the rest of the world. For all the hype that the western world is touting however, there are some important considerations that are not being made public. Whilst hydrocarbon resources still form an important part of the Russian trade balance, they do not have the importance that they did twenty years ago. Rather than them having reduced over recent decades, other industrial fields have come to the forefront, meaning that the growth in agriculture, fertilizers, precious metals and minerals have come to eclipse Moscow’s former reliance on the oil markets. Moreover with China needing ever more resources as it overtakes the US, anything that the West does not want will be gladly accepted by Beijing’s industrial powerhouse.

Feed the World.

Russia being the world’s largest country by area means that it is ideally placed to grow gargantuan quantities of certain crops, an increasingly urbanized world needing to feed those in its cities. Wheat as well as other cereals might be the staples of so many countries’ diets, but increasing Russian yields mean that agriculture has become a staple for the Kremlin’s economic strategy.

Moreover, since sanctions were placed in 2014, Russia has adapted itself to the restrictions these imposed, it becoming far more self-reliant at the same time as it now trades with many other partners. The measures taken by the West most certainly affected the availability of certain goods from the West, yet at the same time those western suppliers have also felt the pinch of their governments’ politics.

Feed the Earth.

For all of Russia’s might in the agricultural sector, it is also a powerhouse in the global fertilizer game. Politicians on both sides of the Atlantic are quick to voice solutions regarding their increase in agricultural productivity to counteract sanctions, yet for all their pie-in-the-sky words, it is in many cases Russian fertilizer under the ground that makes their gardens grow. Take away the huge phosphate shipments leaving Murmansk and other Russian ports and many countries are going to have fields as barren as their politicians’ promises.

Metal Money.

For all the fury expressed by western powers, their extreme measures impose on themselves as much as they do on Russia. The western world revolves around capitalism and consumerism, ‘keeping up with the Joneses’ unfortunately being a core value with many younger people today. The West needs the newest model of car, largest screen TV, latest iPhone as well as this year’s fashion. This requires a vast gamut of resources, Russia being a prime supplier of all of these, be it iron, nickel, copper, neon or precious metals. As global productivity surpasses pre-Covid levels, demand and therefore prices of certain commodities would inevitably have risen, yet the restrictions placed by the western world are over coming months and years going to have devastating effects of the core of their economies. We have already seen the stoppages that chip shortages have caused companies, yet should there be supply issues concerning prime materials, the western consumer may face increasing difficulties in obtaining goods.

Eastern Opportunities.

It is well known that China will continue to do business with Russia like never before, yet the effects of the current situation may serve to accelerate trends that were already beginning to be felt across the globe. India has recently said that it would like to trade with Russia and to cap it all off, that trade would be in rubles and rupees. That may not seem of great importance to the casual observer, but trade with a country as large and populous as India involves huge volumes, not only of goods but also of money. That this money be outside of the dollar is certainly not a body blow to Washington, but is a large step down the path of the future. Should other big players in Asia do the same, US financial influence in the area will begin to wane in an alarming way for the White House, more sanctions inevitably being placed.

POTUS Pressure.

As discussed, for all the damage that sanctions are allegedly doing to Russia and its economy, they are also felt in the West. Add to this the gradual dedollarization of global trade over recent years and Washington will be keen to take any measures it can to sink Russia whilst keeping the reserve currency afloat. Should nations such as India continue to trade with Russia, it can be guaranteed that after being visited by delegations from Washington, certain capitals will be threatened should they continue to trade with Russia. The only factor that has assured American dominance of world affairs over previous decades has been that dominance itself, the dollar being the axis around which Washington has remained at the top. Should the dollar fall out of favor, the US will follow the same fate. We are all aware of Obama’s Pivot to Asia, yet with current affairs being what they are, the White House increasingly finds itself in a spin as it attempts to pivot towards all corners of the globe in its quest to remain supreme. Recent days have seen a US delegation visiting Venezuela in order to obtain more oil from a market it has been lambasting for more than a decade. That US statesmen were meeting Maduro whilst still touting Guaidó as Acting President of Venezuela gives adequate insight into the increasing desperation felt in Washington. Recent days have also seen the American political machine in protracted negotiations with the Chinese government regarding Russia. The West knows that it cannot push Moscow around as it previously could with other nations, yet after years of leveling sanctions and tariffs on trade with China, it is now hoping that Beijing can leverage Moscow to favor the West. With Teheran still not falling for the western narrative, a multitude of factors are creating changes that will soon profoundly affect the US, these just a sign of things to come.

Cast Adrift.

With the list of sanctioned nations now reading like an encyclopedia, the West has to a great degree created the multipolar world that will be its eventual downfall. Having sanctioned China, thrown Russia to the wolves and ostracized Venezuela, Iran and Belarus amongst others, a real divide is now present in the world. That however will be a help rather than a hindrance in the future. With the western world having decided to base its everything around the US, once American dominance and the dollar start to sink, the disconnect that today exists between the West and the rest means that as Washington’s gunboat politics begin to sink its own ship, those with least exposure to the bloated markets and incredible bubble that Wall Street has become will suffer the least when it all goes down. Whilst eastern markets are the great exporters of the world today, their enforced isolation means they do not have to import the woes that affect western markets more each day.

Get Out and Go Up.

The last three weeks has seen the value of the ruble tumble on world markets, this being lauded by western pundits as being due to the pressure they are able to exert on Moscow. This conflict will also cause a shortage in wheat production this year, cereals being one commodity that will surely spike in price as we head towards 2023. Factor other commodities into the equation and at first glance, things are gloomy, above all for the Russian economy. Look at current affairs from a different angle however and things are not as bad for Moscow as one might think. With Russian exports being principally of domestically-produced raw materials, they are not subject to the same financial blowback as trade carried out by other nations. If the ruble falls by 50% on world markets, that means that a ton of grain earns double the local currency that it did before, yet when you factor in the price increases over recent weeks, Russia can sell its goods at previously unseen prices. The fact that the West has cut itself off from Russia is of little consequence when trading with nations outside of this sphere, above all when shortages (and therefore prices) of key commodities will become more acute as time goes on.

Chinese Checkmate.

With prices soaring around the globe, one could be forgiven for thinking that an industrial powerhouse such as China would suffer immensely, yet with it having long-term contracts regarding energy and raw materials with Russia, it will be be far less affected than the West. These contracts not only cover quantity but also price, meaning that China as a whole will be paying far less for resources than other countries. That said, should other nations wish to do the same, the Kremlin would gladly attend to their needs. As the Far East gets back into the swing of things after the pandemic, hot-headed western politics will mean cold turkey for their domestic industries, China having its cake and eating it.

Summary.

Brow beating followed by chest beating from western powers has not for one moment halted Russia’s Special Operation in the Ukraine. The effects of two weeks of western politics is however causing consternation in financial circles across the globe. With short stocks and long prices, crisis prices go straight into the pockets of those who hold what the world needs to function. Gasoline prices are rocketing in the US at the same time as Russian imports were only 3% of national consumption, capitalist gouging of essential commodities playing a far greater role in western woes that Russians in the Ukraine. By creating the divide in the world that it has, the West has forced a new multipolar world order onto itself; the choppy seas of western markets will sink themselves, the East enjoying the favorable currents of the future. When the West threw Russia out of the door, it was slamming the door in the face of its own future…

3 responses to “Slamming the Door behind Them.”

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