By invading Ukraine under the pretext of protecting ethnic Russians and preventing the former Soviet republic from joining NATO and the European Union, Russian President Vladimir Putin planned to show strength to the West. The heavy economic sanctions he has won in response, however, could make him even more dependent on what he describes as his main geopolitical partner.
A case that illustrates this situation well is the departure of the Visa and Mastercard payment systems from Russia, announced over the weekend, which the Russian central bank hopes to compensate by resorting to the Chinese UnionPay system.
Although bilateral trade between Russia and China, of more than US$ 146 billion in 2021, is still well below transactions with the European Union (US$ 220 billion last year), ties between the two countries were already getting closer. and the invasion of Ukraine could accelerate that process.
“For an economy like Russia’s, which is still heavily dependent on export earnings and international trade more broadly, losing access to the global financial system is clearly a painful blow,” said Eswar Prasad, professor of economics and trade policy. from Cornell University and former head of the China Division of the International Monetary Fund (IMF), to Time magazine.
“Restrictions on Russia’s access to the Western-dominated global financial system will undoubtedly lead to a deeper economic relationship with China, in terms of trade and financial dependence,” he added.
With an export agenda heavily dependent on commodities such as fertilizers, minerals, oil and gas, Russia will struggle because the invasion of Ukraine is likely to lead many buyers to look for other sources.
“I think Putin did not expect such a blockade of economic transactions with other countries, Russia is somewhat isolated from the world. Many goods from its export list are being replaced by other trading partners. For example, Russia is one of the biggest titanium suppliers in the world. But Ukraine also has it, other countries have it, which will generate a different allocation of world trade sources”, explained Rodolfo Coelho Prates, professor of the Economics course at the Pontifical Catholic University of Paraná (PUCPR).
In response to the invasion of Ukraine, Germany has suspended authorization for the new Nord Stream 2 pipeline, and the European Union is considering reducing its dependence on Russian gas by two-thirds this year.
The United States announced on Tuesday (8) the ban on imports of oil and gas from Russia. The United Kingdom said it will gradually reduce purchases of Russian oil to stop importing the product from that country by the end of the year, and the European Union is considering a similar measure.
After threatening to immediately stop gas supplies to Europe in retaliation, Putin on Tuesday signed a decree banning exports of products and/or raw materials, which will be specified in a list approved by the Russian government in the next two days. It appears that turning to the East will become a matter of survival for Russia.
“Of course, that would be in a few years, but Russia could have compensation by making a gas pipeline connecting China, India and Pakistan, it is shifting the axis of international relations, from West to East,” said Prates.
“It will become very dependent on China, mainly in the export of natural resources, and obviously this commercial and financial partnership will become more intense now”, projected the professor.
China reaffirms partnership, but has its own interests
China has criticized the sanctions imposed on Russia and has not used the term invasion to refer to the conflict, although it has not supported Moscow’s war. This Monday (7), Chinese Foreign Minister Wang Yi reaffirmed cooperation between the two countries.
“No matter how precarious and challenging the international situation, China and Russia will maintain their strategic focus and constantly advance this comprehensive strategic partnership of coordination for a new era,” said Wang.
A complicating factor is that, in addition to China still being far from representing sufficient compensation for trade with the West, Beijing has its own interests and can take advantage of the siege of Russia to its advantage: in 2014, when Moscow suffered sanctions for the first aggressions to Ukrainian territorial sovereignty, China pressed for lower prices in a previous contract for the supply of natural gas.
This horizon and the difficulties in the invasion of Ukraine, which is not going the way Putin expected, compromise the image of power that the Russian president wants to convey. “Russia is weakened by these economic issues and also from a military point of view, because we observe that the Russian army has a capacity below what we imagined”, concluded Prates.
#Putin #wanted #show #strength #Europe #dependent #China