GT Voice: US Reaps Economic Benefits in Sanctioning Russia

By Global Times

Apr 05, 2022 08:20 PM

Contentious sanction Illustration: Liu Rui/GT

The situation in Ukraine deteriorated again as the US and Europe on Tuesday planned to impose new sanctions on Russia.

Ever since the Russia-Ukraine conflict broke out, Washington and its allies have been clamoring to impose sanctions against Russia. But history tells us that economic sanctions are just as much a weapon against the enemy, escalating the conflict rather than the other way around.

It has become crystal clear that the US has no sincerity when it comes to solving the Russia-Ukraine conflict, since it can benefit from a prolonged and deepening feud between the EU and Russia, promoting American arms and energy sale in Europe.

Compared with the economic dividends the US reaped from sanctions against Russia, Europe's losses on the same page are incalculable. Since the Ukraine crisis started, many European countries have largely chosen to side with the US. They echoed with the US in imposing reckless economic sanctions against Russia, regardless of the huge cost of losing their own energy security and of facing graver difficulties in navigating its post-pandemic economic recovery.

What makes Europe's choice on Russia look even less worth it is that Washington appears to have more flexibility in sanctioning Russia, always geared to satisfy its own interests at any time. 

While the US government has been pressuring its European allies to not buy Russian oil, the US moved to increase crude oil imports from Russia by 43 percent, or 100,000 barrels per day, in the past week, Russian Security Council Deputy Secretary Mikhail Popov told Russian media on Sunday.

And, the sanctions on Russia have greatly increased US' liquefied natural gas (LNG) export to Europe, which used to source more than 40 percent of its gas from Russia. US liquefied natural gas exports rose 16 percent last month to hit a record high, according to Refinitiv data, with shipments to Europe continuing to grow. In a joint agreement, the US announced on March 25 to provide at least 15 billion cubic meters more of liquefied natural gas to Europe this year, seeking to end the bloc's dependence on Russia.

Also, the US dollar usually gains strength when there is a geopolitical crisis or market turmoil. In the wake of the Russia-Ukraine conflict, the US suddenly becomes a safe-haven, attracting more European assets to flow to the US which helps consolidate the dollar's value. For instance, the US dollar continued to gain on Monday as the prospect of fresh sanctions on Russia pushed investors to seek safety in the greenback. 

As the economic sanctions and the worsening refugee problems continue to take toll on European countries in terms of energy shortage, economic burden, social security and other consequences, it can be expected the European economy will experience more difficulties and facing more pressure in the coming weeks and months. 

The EU's economics chief warned on Saturday that Russia-Ukraine conflict is to trigger a significant growth slowdown this year, warning the bloc's projection of 4 percent growth in 2022, issued shortly before Russia's special military action in Ukraine, will need to be revised downward.

The year 2022 should have been a year for worldwide economic recovery, but the abuse of unilateral sanctions by the US government to pursue its own geopolitical strategy has created ever-growing uncertainty for the global economy. 

The most significant impact of the US sanctions is to push up the already elevated inflation by exacerbating global supply chain bottlenecks and driving up prices of energy, raw materials and many other commodities. As surging inflation sits in, the global economy may risk suffering from a considerable level of "stagflation", which will aggravate the hardship of ordinary wage-earners.