The idea that Vladimir Putin’s invasion of Ukraine has pitted Russia against the world enjoys wide popularity, hampered only by the fact that it is not entirely true. While much of the world’s population is horrified by the resurgence of wars of conquest, the united front of Western governments and businesses (albeit with some behind-the-scenes pressure) and the militarization of trade and finance against Moscow have cooled even those who do not sympathize with international predators. By demonstrating the ability to turn supposedly neutral institutions against those who anger powerful elites, the West prompted the world to seek alternative channels, if only for self-preservation. That may guarantee the end of relatively free global trade and the return of competing economic blocs.
“The suggestion that Putin is isolated may still be a kind of Western bias, an assumption based on a definition of the ‘world’ as privileged places, largely the United States, Europe, Canada, Australia and Japan,” Anthony Faiola and Lesley . Wroughton noted earlier this month by the Washington Post. Even among those unsympathetic to Putin’s aggression, there is a tendency to see just another “Machiavellian tug-of-war between Washington and Moscow,” they added.
Why the lack of enthusiasm for what seems to many people to be a classic fight of good against evil in the invasion of a relatively free and democratic Ukraine by its authoritarian neighbor?
“While enthusiastic Western liberals welcome the imposition of sanctions on Russia, the increased willingness of Western powers to weaponize the global economic system horrifies the leaders of many countries who think the West is already too powerful.” warned Walter Russell Mead of Bard College in The Wall Street Journal.
Russian shock at the extent of such sanctions was shown when Putin boiled, “Now the whole world knows that any asset could basically be stolen,” in a March 16 speech in response to the seizure of foreign exchange reserves. But it is easy to see how other countries, entire industries and individual companies could worry about becoming future targets if they come across Western political and business elites who appear to be working in unison and are willing to use their influence to force compliance. Financial titans bragging about the impact of such influence do little to allay concerns.
“The invasion has catalyzed nations and governments to come together to sever financial and commercial ties with Russia,” Larry Fink, chief executive of BlackRock, the giant international investment fund, rejoiced in a letter to shareholders. posted yesterday. “United in their firm commitment to support the Ukrainian people, they launched an ‘economic war’ against Russia. Governments around the world imposed sanctions almost unanimously, including the unprecedented move to ban the Russian central bank from deploying its hard currency reserves.” .
“Capital markets, financial institutions and companies have gone even further than the sanctions imposed by the government,” he continued. “As I wrote in my letter to CEOs earlier this year, access to capital markets is a privilege, not a right. And after the Russian invasion, we saw the private sector quickly end business relationships and long-standing investment.
BlackRock is a punching bag in certain circles for combine trendy environmental, social and governance (ESG) concerns in your business strategy. The company discourages investment in fossil fuels and firearms, and promotes the diversity, equity and inclusion movement. Fink doing a victory dance about the effectiveness of “economic warfare” can only raise concerns around the world about running into ideological pitfalls and ending up in financial purgatory.
“The Trump administration’s unilateral imposition of harsh sanctions against Iran heightened international awareness of how much power the global economic system gives the United States,” observed Walter Russell Mead. “But waking up Democrats who use economic sanctions to impose their views on climate, gender and other issues are even less welcome in many countries than Trump’s populists.”
So it is jarring, but not surprising, that representatives from Brazil, Russia, India, China, and South Africa (the BRICS countries) met in Moscow this week as if nothing special was happening in the world. Among those countries, Brazil (along with Argentina) and South Africa leaning in favor of Russia because of economic ties and resentment of American influence. India is seeking new deals “that would allow Indian exporters to continue their business with Russia even after Western sanctions restrict international payment mechanisms.” according for Asia-Pacific News. China sees opportunity cultivate a fellow authoritarian regime while offering safe haven (if you choose to believe in Beijing guarantee) to developing countries concerned about armed financial institutions.
Outside the BRICS group, Saudi Arabia may accept China’s yuan as payment for oil instead of the long-established dollar. “The Saudi move could undermine the supremacy of the US dollar in the international financial system, which Washington has relied on for decades to print Treasury bills that it uses to finance its budget deficit.” grades The Wall Street Journal.
“It now seems likely that the world economy will actually split into blocs, one oriented around China and one around the United States, with the European Union mostly, but not entirely, in the latter camp, each trying to isolate itself and then diminish the influence of the other,” commented economist Adam Posen, who supports economic sanctions but sees long-term consequences.
“With less economic interconnectedness, the world will see lower trend growth and less innovation. Domestic established businesses and industries will have more power to demand special protections. Taken together, real returns on investments made by households and corporations will decline.” “, he added. .
“The Russian invasion of Ukraine has put an end to the globalization that we have experienced in the last three decades,” agrees BlackRock’s Fink, despite his enthusiasm for weaponizing finance in ways that promote such fragmentation. He predicts that “a large-scale reorientation of supply chains will be inherently inflationary.”
Interestingly, both men see CRYPTOCURRENCIES as the potential to break down the world’s growing economic and financial barriers unless governments control them.
So the “unified” world that opposes the Russian invasion of Ukraine may largely share the horror of the invasion of one country by the armies of another, but much of the same world is also nervous about the economic sanctions imposed on response to that invasion. Governments and companies will establish new barriers and alliances to protect themselves from the future militarization of trade and finance. And in that fragmented world to come, we will all end up a little more isolated and poorer.