Escaping the global sanctions net

News: Western countries have put several types of economic sanctions on Russia. However, the effectiveness of these sanctions is debatable.

The way of expressing global dominance and hegemony is changing. Now, it is expressed through financial sanctions, instead of troop presence. Most recently the method has been adopted against Russia.

First, financial manipulations from afar in the form of sanctions. In Afghanistan, financial sanctions gave the US government the ability to exercise control over a government or its activities or both. Furthermore, it also controls those countries or corporations trading with or investing in Afghanistan.

Second way of exerting control from afar is confiscation of foreign exchange reserves in American banks. For example, the US froze Afghanistan’s foreign exchange reserves of $7 billion deposited in the New York Federal Bank, after its withdrawal.

What were the implications of sanctions on Afghanistan?

Role of private sector: These sanctions are designed by government and implemented by both profit-making and non-profit private enterprises, domestic and international NGOs (including the United Nations).

China’s chance to build dominance: This move gave China with the chance to unite its investments in Afghanistan and Pakistan, isolating India. Furthermore, it gave economic lever of Afghanistan in the hand of China in the form of rich mineral resources.

What are the implications of sanctions on Russia?

Unlike Afghanistan, Russian economy is more isolated, protected and less reliant on international funding. So far, the possible impact of sanctions on Russia is estimated at a 1 per cent loss in GDP.

Banning Russia from the SWIFT system of international payments is a problem for the global financial system. The impact of any disruption in Russian exports of oil, gas, palladium, wheat, and fertilizer will have repercussions for the global economy, recovering from covid shock.

Lastly, the Ukraine incident shows a cooperation between Russia and China in the form of division of labour. While China is focusing on the economy, the Russia is attending the political and the military aspects of keeping the US out of Eurasia.

Source: This post is developed based on the article “Escaping the global sanctions net” published in Indian Express on 2^nd March 2022.