Western Sanctions Against Putin Are Working and Hampering the Russian War Effort.
Essential reminder while the Kremlin propaganda tries to convince Europeans otherwise.
Over the past few weeks, you have probably heard the following phrase, just as I have: “Europe is shooting itself in the foot.”
This is the story that is spreading in a part of the European opinion, coming from TV sets and some economists: the EU would have taken sanctions against Russia that would turn against it, without bothering Moscow. And to explain that the sanctions will cause a shortage of electricity this winter, while Russia “swims in cash” thanks to the surge in hydrocarbon prices and sees the ruble soar.
Moscow would bypass the export embargoes of the European Union via the black market or thanks to its Chinese ally ... The European Union, blind and masochistic, would have followed the United States in this adventure when the defense of our interests would have ordered to only advocate a “diplomatic” solution, a formula which means “let Putin invade Ukraine.”
The only concern, and it is a big one, is that all this is largely a myth.
This discourse is based on a misunderstanding of the real objectives and functioning of Western sanctions. These sanctions are not so much aimed at bringing the Russian economy to its knees, impossible given the country's agricultural resources and well-known resilience, as at paralyzing its war effort and suffocating its key civilian industries to encourage it to withdraw from Ukraine.
These sanctions are proving quite effective in this regard. For lack of imported components, especially semiconductors - Moscow admitted on Tuesday 13 September 2022 that it was 15 years behind the rest of the world - many factories in the military complex have had to reduce their production, or even shut down, such as the anti-aircraft missile factory in Ulyanovsk, the air-to-air missile factory in Vympel, and the tank factory in Uralvagonzavod, the country's main production site.
The Kremlin recycles microprocessors from refrigerators and washing machines in its weapons.
And Moscow is probably unable to reconstitute its stock of 3,000 cruise missiles, crucial for their precision and power, 75% of which have already been consumed. An investigation by the Royal Institute for Strategic Studies (RUSI), a British think tank, of 27 types of captured Russian weapons shows that they all contained crucial components from 70 Western firms. Each cruise missile has several dozen components that are not produced in Russia.
Russia can indeed obtain critical components on the black market, but it is more expensive, less reliable, and takes longer. Some of them are very specific, especially German, and are impossible to find in China. Moscow now uses mostly so-called “stupid” shells and bombs, i.e. unguided, from its 1970s-1980s stocks.
Worse still, Putin's Russia is reduced to buying North Korean shells and Iranian drones.
Finally, due to a depletion of public revenues as a result of the Western embargo on the purchase of gold, coal, and metals, pay is only arriving episodically to some regiments. This would contribute to refusals to fight, or even surrender.
The second impact of the sanctions is unemployment, which has been swelled by the departure of a thousand Western companies. To make matters worse, inflation is now at 15%, and the recession would be at least 6%. Industries are almost shut down one after the other. For lack of spare parts, airliners have started to “cannibalize” each other, i.e. to replace worn-out parts with those of other grounded planes. In May and June 2022, Russian car production was divided by twenty, while sales of computers dropped by 25% and cell phones by 27%. Some medicines are running out.
The Kremlin claims that local industry will be able to replace imports, but this is doubtful given the corruption and brain drain: 500,000 Russians have left the country this year. In total, Russian imports have been divided by two in the second quarter over the same period of 2021. Indeed, Chinese companies refuse to take the place of Western exporters, for fear of losing, in retaliation, the vast American market, eight times more important for them.
All this puts into perspective the interest for Russia to “swim in cash” thanks to hydrocarbons since it no longer can spend it. A bit like a castaway sitting on a pile of gold on a desert island.
Hydrocarbons, precisely, are seeing their prices soar, which feeds the mill of opponents to sanctions. Except that none of them is aimed at Russian oil and gas at the moment, for the simple reason that the West believes it still needs them. It is the Russian response, which is logical, thanks to a reduction in Gazprom's flows, which contributes to the increase in tariffs but only in part.
Any large-scale war makes world energy markets nervous. This explains why the barrel rose to 128 dollars in March 2022, almost an all-time high. But it has since fallen back to $85, below the pre-invasion level, well helped by Xi Jinping's zero-COVID strategy in China. Gazprom had doubled its prices in the ten months preceding the invasion, i.e. before the Western sanctions. This should have been a warning to us.
The fact remains that Europe is threatened with a very cold winter. Really? Given the ongoing disaster for the Russian army, Ukraine may have reconquered by then the territories taken by Moscow since the beginning of the invasion. In other words, Russia could have more or less lost the war at Christmas...
So what sense would it make to impose an embargo on its gas and oil sales?
Some reading
More Than Ever in Trouble, Vladimir Putin Is Desperately Seeking the Support of Xi Jinping. “Hello Xi, I beg you to help me.”
Ethereum “Merge” Has Finally Happened — First-Day Recap and Bullish Consequences for Bitcoin. Bitcoin is more than ever your only option to take power over your money and your life.
Putin Is Faced With a Situation He Hates: He Has to Decide Under the Pressure of the Ukrainians’ Success. Putin is now facing double pressure: that of Ukraine and the hawks in Russia.
Bitcoin Is Not an Enemy, but an Ally in the Fight Against Climate Change. Governments should open their eyes to fully exploit the potential of Bitcoin rather than trying to harm this people’s revolution.
Noise vs. Signal in the Bitcoin World. It’s Up to You to See the Bigger Picture. Bitcoin’s short-term price is just noise. The Hash Rate beating a new ATH is the real signal these days.
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