Trade surpluses vs Most sweeping set of sanctions ever aimed at a country since World War 2

Russia’s obscene invasion of Ukraine has resulted in the largest, most sweeping set of sanctions ever aimed at a country since World War 2.

Saturday 26 February , a coalition of Western nations pledged to cut off Russia’s banking system from the rest of the world by booting it off SWIFT (“Society for Worldwide Interbank Financial Telecommunication”) the global cooperative company run by the world’s largest banks, founded in 1973 and headquartered in Brussels, Belgium. This made that people can’t transfer money to and fro Russia. In 2014, following Russia’s original assault on Ukraine several European leaders were at that time also reluctant. The US Treasury worried that too severe sanctions would cause another Lehman Brothers crisis, so it moved cautiously. Russian central-bank reserves and the SWIFT payments system were out of bounds. Now, at first Germany’s new chancellor Olaf Scholz, opposed the measure. Some also see a danger Chinese authorities finding some benefit from helping Russia out. When Russia feared being cut off from the SWIFT system following the 2014 invasion of eastern Ukraine, it created SPFS, an alternative bank messaging system. To date, its use has been largely limited to Russian banks, but it might persuade Chinese banks to participate. China said it would not join US and EU financial sanctions on Russia, the country’s bank regulator announced, saying it was opposed to them and they did not work.

Foreign minister Dmytro Kuleba asked China to use its ties with Moscow to convince Russia to stop its invasion of the country. China’s foreign minister Wang Yi, whose country has refused to condemn Russia’s attack on the country or to call its actions an invasion, told Mr Kuleba that Beijing was ready to make every effort to help end the war through diplomacy. Mr. Wang also said to have been

“extremely concerned about the harm to civilians”

in the ongoing conflict.
In January, Chinese President Xi Jinping marked 30 years of ties with Ukraine, hailing the “deepening political mutual trust” between them. But China is also by far the most important economic lifeline for Russia, which has been focusing on trade with the East since 2014.

Total trade between China and Russia rose by almost 36% last year to a record $147 billion, according to Chinese customs data obtained by Reuters. This shows that Russia is an important source of oil, gas, coal and agricultural commodities for China, so Putin’s country also has a trade surplus with Beijing. In fact, since the first round of international sanctions were imposed in 2014, shortly after Russia annexed Crimea, bilateral trade has increased by more than half and China has become Russia’s biggest export destination.

The large Chinese state banks last month were quick to assure rich Russian clients that they would not be abandoned. But they first made sure that they themselves could not be financially affected by Western ‘secondary sanctions’.

Reuters reported last week that a large Chinese state bank with a branch in Moscow had received 200 to 300 applications from Russian companies to open a bank account in the Chinese currency this week alone.

Australian Prime Minister Scott Morrison is not confident that Western sanctions are really going to make a difference. He fears that Beijing will deliberately undermine the sanctions and thus offer Russia “a lifeline” to prolong the war with Ukraine. But that does not impress Washington much at the moment. According to CNBC, it is believed that China’s lifebelt – important though it is – will not be enough to fully compensate for the impact of sanctions against Russia. Even though, according to The Wall Street Journal, Chinese companies have a reputation for being able to skirt around sanctions in practice.

Boeing, sports firm Nike, Apple, H&M, Zara, Coca Cola, Danone, Ikea, car makers Ford, Jaguar Land Rover, are some of the international companies that stopped all activity in Russia.

Several European ministers want to freeze the assets of rich Russians and use words like ‘track’, ‘pursue’ or ‘drain’. The G7 countries have even set up a special task force to find out who or what they should go after. The European Commission has already ticked off more than twenty names.

American-born British financier and political activist William Felix or Bill Browder says he is ‘astonished’ by so much resolute unity. He is the CEO and co-founder of the investment fund and asset management company specializing in Russian markets, the Hermitage Capital Management, the investment advisor to the Hermitage Fund, which at one time was the largest foreign portfolio investor in Russia. Although he was originally a supporter of Russian president Vladimir Putin, in November 2005 he was blacklisted by the Russian government as a “threat to national security” and denied entry to the country. According to a publication in The Economist, the fund was also blacklisted because its management interfered with the flow of money to

“corrupt bureaucrats and their businessmen accomplices”

in Russia. Mr. Browder says:

“I think Putin is surprised too. He probably thought that nobody would ever really go after the oligarchs, because it never happened before. In his eyes we were too greedy and too divided.”

As a result of Western sanctions, Russia has been unable to access some 40% of its EUR 570 billion war chest since Monday 28 February. Experts suspect that Putin did not see this sledgehammer blow coming on 28 February. The Russian ruble lost 30 percent of its value on that day. By March the 2nd the rouble plunged to a new low in Moscow of 110 to the dollar and the stock market remained closed as Russia’s financial system staggered under sanctions.

On Wednesday the 2nd of March the UN general assembly voted overwhelmingly to deplore Russia’s invasion of Ukraine and called for the immediate withdrawal of its forces, with 141 of the 193 member states voted for the resolution, 35 abstaining and five – Russia, Belarus, Syria, North Korea and Eritrea – voting against.

British investor Bill Browder, who has been fighting the corruption of the oligarchs for years, is pleased that the hunt is on.

The Dilbar, one of the largest yachts in the world, is not allowed to leave Hamburg. The owner is Alisjer Usmanov, boss of USM, which invests in mines and metals. – Finnbar Webster/getty

The last few days have seen an exodus of luxury ships from European ports. At least five ships belonging to Russian oligarchs surfaced off the coast of the Maldives. Not all of them escaped in time. In Hamburg, the Dilbar, one of the largest yachts in the world, was not allowed to leave. Its owner, Alisher Burkhanovich Usmanov, is on the sanctions list of the European Union, being blacklisted by the EU imposing an EU-wide travel ban and freezing all his assets. The boss of USM, a company that invests in mines and metals, was for a long time an important shareholder of the British football club Arsenal and a sponsor of Everton.

In the fashionable La Ciotat on the French Azure coast, the customs authorities detained the Amore Vero, a yacht owned by Igor Ivanovich Sechin, CEO of the Russian oil giant Rosneft and considered a close ally and “de facto deputy” of Vladimir Putin. On Twitter, the French Finance Minister, Bruno Le Maire, thanked the customs officers

‘for applying the European sanctions against persons close to Russian power’.

The exporters of fresh fruit have, of course, also been affected by the export measures imposed on Russia. But also product shortages of material which normally comes from Russia creates problems in Europe. Spot shortages in aluminum, copper, steel, precious metals, and rare earths are likely to appear in the months ahead and conflict in Ukraine will exacerbate supply shortfalls.

But also indirectly we will feel the sanctions against Russia here in Western Europe. Brazil and India being very dependent on Russian fertilizers and China needing gas and raw materials from Russia to produce their goods for export to Europe shall have the price of those goods to increase, but also shall be stuck by delivering difficulties.

What is terrible is that it is mainly the ordinary good citizens of Russia who will be most affected by all the restrictions imposed. They see that with their very low incomes, they will now be able to gain even less in order to keep their standard of living bearable. Disabled sportsmen and women will see their support money and income completely cut off, as they will no longer be allowed to participate in foreign sporting events. Artists as dancers and theatre producers are also seeing their income from abroad disappear, as well as the number of foreign spectators in their own theatres no longer supplementing their receipts.

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Published by Marcus Ampe

Retired dancer, choreographer, choreologist Founder of the Dance impresario office and archive: Danscontact-Dansarchief plus the Association for Bible scholars, the Lifestyle magazines "Stepping Toes" and "From Guestwriters" and creator of the site "Messiah for all". - Gepensioneerd danser, choreograaf, choreoloog. Stichter van Danscontact-Dansarchief plus van de Vereniging voor Bijbelvorsers, de Lifestyle magazines "Stepping Toes" en "From Guestwriters" en maker van de site "Messiah for all". View more posts