The renowned British weekly The Economist asked a very good question this week about the usefulness of economic sanctions against Russia: when will sanctions cause more problems for Western countries than for Vladimir Putin?
Posted on February 27
This is especially true for Joe Biden.
The American president is already unpopular: 52% of Americans disapprove of his action, against 42% who approve. And Mr. Biden’s main problem is the economic situation. A sluggish post-COVID-19 recovery, supply chains already battered by the pandemic and, most importantly, inflation are hurting Democrats’ chances in next November’s election.
However, most of the sanctions imposed so far are likely to cause inflation to rise even further around the world. If Russia supplies less gas and oil to European countries, prices will necessarily rise. And since the oil and gas market affects the entire global economy, these price increases will necessarily be reflected in the United States.
The price of a gallon of gasoline at the pump is often a much better indicator of the state of mind of American voters than opinion polls. The average price per gallon of gasoline was below $3 a year ago. It is now at $3.57 (national average) and is as high as $4.79 in some states that tax gasoline more, such as California.
Food prices could also rise. Russia is the world’s largest wheat exporter; any disruption in this sector could also push prices up.
As Mr. Biden very openly said in his Thursday press conference, “defending freedom will come at a cost to us here, and we have to be honest about that.” It remains to be seen whether the Americans, and his political adversaries, will not want to make him pay the price.
The problem for Mr. Biden also concerns domestic politics. Normally, in a situation of international crisis, especially when national security issues are at stake, the president can count on the support of his opponents in Congress. Not this time. The division is such currently in the United States that several Republicans say they do not support Mr. Biden’s approach.
The example comes from above since former President Donald Trump claimed that Vladimir Putin was “very smart” and that he had “taken control of a country against two dollar sanctions…”.
Many in the Republican base are listening to star Fox News network commentator Tucker Carlson, whose pro-Russian stances are increasingly evident, which is having an effect on some elected officials.
For the weakened President Biden, the boomerang effect of the sanctions against Putin’s Russia therefore carries a great risk of an even greater increase in inflation which could lead to the loss of his majority in Congress.
But Mr. Biden is not alone.
Germany surprised many people by foregoing the new Nord Stream 2 gas pipeline which would have allowed it to increase its consumption of Russian natural gas. But this risks causing it supply problems that could harm several sectors of its economy.
Russia supplies 55% of the gas consumed in Germany. It also supplies more than 40% of Italy’s gas. No wonder these two countries are the least inclined to want to increase economic sanctions. These are therefore countries which are right to be afraid of a boomerang effect of sanctions which would harm their own economy.
In particular, they are reluctant to close Russian banks’ access to SWIFT, the international banking transaction network. Simply because it is the way to pay for the Russian gas they are so dependent on.
As for Boris Johnson’s Britain, it is being criticized for failing to impose targeted sanctions on the many Russian oligarchs who have moved to London to pursue their businesses there, including buying some of the most famous soccer clubs in the world. kingdom!
Canada is relatively immune to boomerang sanctions. Except, like almost everyone else, with regard to their effect on inflation. But Canada being an oil-producing country, an increase in energy prices also has an interesting effect on public finances.
Finally, economic sanctions rarely have an immediate effect. They take time to have an effect. Thus, after the first sanctions against Russia following the annexation of Crimea in 2014, it took several months before a drop in economic activity was observed.
But the effects have indeed been there, two consecutive years of economic decline.
So we come back to the original question: will the sanctions have an effect on Vladimir Putin before the boomerang returns to those who imposed them?