The west and the rest

Wolfgang Münchau writes for The Financial Times, which avidly supports western sanctions against Russia. Münchau himself also supported the sanctions when they were first imposed, but he is now seeing that those sanctions have backfired. His article below had to be published in some paper other than The Financial Times.

https://www.eurointelligence.com/column/the-west-and-the-rest

His headline reads: The West and the Rest. This in itself is an admission that the sanctions destroyed globalism and divided the West from the rest of the world. The goal of sanctions was to isolate Russia from the rest of the world, but it has only divided the world into two unequal parts: East and West, with most of the world’s population being in the East.

The western sanctions were based on a formally correct but misleading premise, one that I believed myself at least up to a point: That Russia is more dependent on us than we are on Russia. Russia has more wheat than it can eat, and more oil than it can burn. Russia is a provider of primary and secondary commodities, on which the world has become dependent. Oil and gas are the biggest sources of Russian export revenues. But our dependency is most acute in other areas: food and also rare metals and rare earths. Russia is not a monopolist in any of the categories. But when the largest exporters of those commodities disappears, the rest of the world experiences physical shortages and rising prices.

The most important macroeconomic revelation that has come out of this is that the West is far more dependent upon Russia than the other way around. He continues:

Did we think this through? Did the foreign ministries that drew up the sanctions discuss at any point what we would do if Russia were to blockade the Black Sea and not allow Ukrainian wheat to leave the ports? Did we develop an agreed-upon response to Russian food blackmail? 

Münchau is mistaken in thinking that Russia is blockading the Black Sea. No doubt he still thinks that the mines blocking the port of Odessa were put there by the Russians. No, they were put there by the Ukrainians in anticipation of a Russian attack upon Odessa. Far from being an attempt to blackmail the world by withholding food, it was a military decision by Ukraine.

For its part, Russia has offered its own ports along the Black Sea to be used to ship Ukrainian grain to the world.

Economics sanctions work when the target is small: South Africa in the 1980s, Iran, North Korea. Russia is much larger…. Those networks effects are sufficiently large to render the instrument of economic sanctions unsustainable. Alternative sources exist for each and every one of those Russian commodities…

I have concluded that we are all too connected to be able to impose sanctions on each other without incurring massive self-harm. You may argue that it is worth it. If you do, you sound like the tenured economics professor who argues that a rise in unemployment is a price worth paying.

When the US sanctioned smaller countries, the sanctions did indeed cripple those countries, because they depended upon the West to maintain their economies. The worst that the US suffered by sanctioning Cuba, for example, is that those addicted to Cuban cigars had to go into rehab. But Russia is largely self-sustaining. There are no food shortages or oil/gas shortages in Russia. The only shortages are in luxury items, which the wealthy can get from India and other places.

Unless we cut a deal with Putin, with the removal of sanctions as a component, I see a danger of the world becoming subject to two trading blocs: the west and the rest. Supply chains will be reorganised to stay within them. Russia’s energy, wheat, metals, and rare earths will still be consumed, but not here. We keep the Big Macs…

To me, economic sanctions look like the last hurrah of a dysfunctional concept known as the west. The Ukraine war is a catalyst of massive de-globalisation.

The “de-globalisation” of the world means the failure of Babylon’s goal for a one-world government. At best, we would have a two-world government and the two sides would be “the west and the rest.”