Russia First Economics

Western Sanctions Are Going to Have the Opposite of their Intended Effect

            With Russia’s latest invasion of Ukraine nearly three weeks ago, Western countries, and corporations, have responded in ways that they believe will cripple the Russian economy.  The sanctions have and will hurt the people of Russia in the short term.  However, as is often the case, the Western powers have not considered the long-term implications of banning McDonald’s, ending access to SWIFT, and other punitive measures.  The recent history of Gab can serve somewhat as a comparison.  Following the reactions of users on Gab to a mass shooting in 2018, corporations banded together to cut Gab, a true free speech platform, off the internet.  Andrew Torba, to his credit, worked tirelessly to build the infrastructure in-house to relaunch Gab.  Gab’s relaunch found massive success in comparison to its former self.  If the sanctions continue, Russia itself will relaunch into a much stronger and independent Russia.  This possibility is bad news for Western powers’ foreign policies.  You have to ask yourself, does having access to Pornhub and MacDonald’s make your country stronger or weaker?

            In 1929, Henry Ford agreed to sell Model As to the USSR.  This was four years before the US even recognized the government of the USSR.  Prior to the US entering the second World War, the US was supplying arms to the USSR through a lend-lease program.  Trade continued to grow following the WWII until Jimmy Carter responded to the Soviet invasion of Afghanistan by barring imports of Soviet grain and banning exports of high technology into the USSR.  The Soviet Union would collapse some ten years later, but there is a stark difference between then and now. 

            “The Cold War is over Mitt,” Barrack Obama gleefully quipped in 2012 during a presidential debate.  This was true in 2012 as it is true today.  The Soviet Union does not exist.  Neither does communism in Russia.  Russia abandoned its economic model when the Soviet Union collapsed.  Some of the noted drawbacks of communism is the lack of innovation, motivated workers, and poor centralized planning.  With its current capitalistic model, these drawbacks are no longer a threat to the Russian economy.

            Unlike other sanctioned countries, Russia is capable of being self-sufficient.  North Korea relies heavily on China for most of its trade.  The coal going across the Chinese-DPRK border become a big point of contention for Donald Trump and President Xi when Trump was trying to impose tougher sanctions on North Korea.  Iran is another heavily sanctioned country.  They’ve experienced inflation upwards of 40% in the past three years.  Iran’s leaders have started what they term a “resistance economy.”  The president of Iran announced in January 2022 a lofty goal of 8% growth this year, with a renewed focus on self-sufficiency and regional trading partners.  This comes after China announced earlier this year that it has scoffed the US sanctions and bought its first barrel of Iranian crude oil since December of 2020.

            Russia’s sheer size allows it to span two continents, encompassing vast quantities of natural resources.  The abundance of Russian oil and natural gas makes it self-sufficient in the energy sector.  Non-fuel minerals are available in vast quantities as well—iron, gold, tin, coal, bauxite to name a few.  The explosion of a powerful Russian economy has never happened because it has been recovering from the dreadful economic realities of Soviet central planning.  Although the population may be hurting in the near term, the potential for a completely self-sufficient economy and population is a very real possibility in the coming decades.

            Consider if Central America, China, and East Asia banned exporting to the US.  What would happen to the US economy and country?  Also consider if the US had competent leaders who cared about the people in their country.  How might that pan out?  This would be devastating.  Fuel, electronics, food, and a plethora of other finished goods would become unavailable overnight. How would Americans respond.  Factories would fill with workers to make computer chips in the US again.  High paying manufacturing would return.  America would once again be energy independent.  Americans would also rally around their leaders, flag, and country to defeat the evil powers that tried to ruin their lives.  Of course, these changes would not happen overnight.  The leaders would need to figure out convoluted means of acquiring the required raw materials that America does not possess, an issue that would plague the US more so than the Russians.

            We’re already seeing Russia respond in this manner.  Mir is a Russian payment processor adopted in 2017 by the Central Bank of Russia.  Since Visa, Mastercard, and others payment processors have ended their relationship with Russian citizens, Mir is being much widely adopted as response.  This move has made Russia more independent and therefore less dependent on Western powers and corporations. 

            Russia is finally being forced to become independent of Western powers and corporations.  Russian foreign policy has been a Russia First policy.  Now, however, their economy will follow.  After the collapse of the Soviet Union, Western powers and corporations were eager to move in exert power over the culture and economy.  The void that has recently been created by the woke corporations will eventually be filled.  If Putin plays his hand right, Russia will emerge as an even stronger competitor.  Sanctions will become even more meaningless as the economic void is replaced by institutions that have no loyalty to Western regimes.  The foreign policy of Russia will be much blunter than it has been to the frustration of NATO and the United States. 

            The world needs Russian goods much more than Russia needs Western goods.  Biden doubled down as recently as today that the climbing gas prices were Putin’s fault.  Biden’s energy policy has been a disaster for the US.  He ended construction of the Keystone Pipeline during his first week in office.  His administration is refusing to hand out new permits for oil exploration.  Biden’s press secretary, Jen Psaki, claimed the oil companies were being selfish for not drilling for more oil.  Now, NATO has been slowly expanding east to be neighboring Russia.  Russia responded as predicted by every competent official and pundit since the early 2000’s.  Biden’s administration imposed oil sanctions unilaterally.  Russian oil continues to flow into Europe and the rest of the world.  Putin is not raising gas prices.

             The 2014 US sanctions on Russia were laughable at the time.  They were issued in response to the invasion of Crimea region.  The sanctions targeted Putin personally, as well as individuals within his inner circle.  President Trump continued those sanctions and added some more individuals and businesses to the list.  They had no real effects.  In this current conflict, corporations are fleeing Russia, opening the door for a Russia First economic policy.  As Russia recovers, sanctions will continue to mean less.  Russians can create a parallel economy that leads their country into a prosperity that the rest of the world will be unable to affect.  The sanctions against Russia will further alienate and politically divide the world just as the actions of US leaders and media have further divided Americans politically.