Since Russia invaded Ukraine, some have questioned whether Western sanctions on the nation have backfired.
However, according to prominent economist Paul Krugman, measures to choke Russia’s economy have been working unexpectedly, and history suggests the West will prevail in the economic struggle.
Despite Western nations’ fixation on limiting Russian exports, Krugman noted in a Tuesday op-ed for the New York Times that Moscow’s economy is suffering as a result of restrictions on Russian imports.
“Russia is having no problem selling stuff, [but] it’s having a lot of trouble buying stuff,” Krugman wrote.
It’s a change from the initial strategy, which aimed to reduce Russia’s war earnings through energy restrictions and perhaps a price ceiling on Russia’s energy, which Western leaders are hoping to propose by the end of the year.
However, things haven’t worked out as planned; according to data, Russia made $24 billion in energy exports in the first three months of the conflict alone, and it has been restricting supply to Western countries to raise energy prices, which has pushed European economies dangerously close to a recession.
Natural gas has increased by 70% to $7.81 and Brent crude has increased by 8% to $101.96 since the beginning of the invasion of Ukraine.
On the other hand, the import part of the equation tells a quite different story. According to Krugman, the volume of Russia’s trade with sanctioned nations has decreased by sixty per cent, while the volume of Russia’s trade with non-sanctioned nations has decreased by forty per cent.
The result has been a sharp decline in Russia’s industrial production and, consequently, GDP. According to the Peterson Economic Institute, the nation’s production of items including plastic, coal, and home appliances has decreased by as much as 50%.
Economic sanctions against Russia, therefore, seem to have been remarkably effective, albeit not in the way that everyone had anticipated, according to Krugman.
In the past, attempts at economic warfare have generally failed, unless they involved a military effort, such as when the US sank Japanese merchant cargo during World War II, which led to the collapse of the Japanese economy.
That gives reason for hope as Russia continues to cut off energy imports from Europe, indicating that despite its best efforts at retaliation, it will be difficult for it to triumph against the West.
However, Krugman admitted that the struggle will be impacted by elements like high recession risks and inflation, which are currently putting the West in a precarious situation.
The European Central Bank aggressively raised interest rates by half a point a few weeks ago in response to sky-high prices and deteriorating economic mood, while the Federal Reserve raised rates by 75 basis points last week to combat inflation that is at 41-year highs.
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However, as the world prepares for winter without the usual flow of Russian gas supplies, Europe in particular still confronts even more challenges.
