A fresh blow to globalisation

News: There are two broad possibilities that may arise as an effect of the present Ukraine crisis – one is the reordering of international relations, and the other is declining globalisation.  

How the western countries have responded to the Ukraine Crisis? 

The West has imposed what are supposed to be the harshest sanctions ever faced by any country.

The US has banned oil and gas imports from Russia.

The UK is curtailing oil imports.

Russia has been cut off from the SWIFT messaging system. Select Russian banks have been barred from the payments system. 

What, as per experts, led to the Ukraine crisis?

Majorly, the narrative that has been commonly accepted and which the western world is also supporting is that conflict in Ukraine has happened because Russia wants to recreate the Soviet empire. 

An alternative narrative is that Russia sees the inclusion of Ukraine in NATO as an existential threat and the intervention in Ukraine as necessary to prevent a nuclear conflagration in the near future. This view was earlier also proposed by thinkers like Henry Kissinger who had warned that conflict with Russia was inevitable if the expansion continued. 

How the present crisis can negatively affect world trade and globalisation? 

Foreign entities are facing issue to access Ruble payments parked with Russian banks, and repayment of dollar-denominated Russian bonds are also in doubt.  

Although Russia has not yet curbed the oil and gas supplies, however, there prices are still rising. Due to this the world will have to suffer the costs of higher inflation and lower growth. 

Rising protectionism, concerns about national security and the Pandemic had already slowed the momentum of world trade and investment flows. The current crisis will deliver another blow to globalisation. 

What are some key lessons for India from this emerging scenario? 

Russia is facing severe restrictions on its access to its central bank foreign currency reserves parked in the West.

This raises questions about Nations parking foreign exchange surpluses with central banks in the West. This has led many to point out that greater integration with the outside world makes an economy more vulnerable to external pressures and could compromise a nation’s sovereignty. 

Source: This post is based on the article “A fresh Blow to globalisation” published in Business Standard on 10th Mar 22.